<PAGE> 1
Filed with the SEC on April 28, 1997 Registration No. 333-25309
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
AMENDMENT NO.1 TO
FORM S-4
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
-------------------------
DEPOSIT GUARANTY CORP.
(Exact name of registrant as specified in its charter)
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MISSISSIPPI 6711 64-072169
(State or other jurisdiction (Primary Standard Industrial (IRS Employer Identi-
of incorporation or Classification Code Number) fication Number)
organization)
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ARLEN L. MCDONALD
210 EAST CAPITOL STREET 210 EAST CAPITOL STREET
POST OFFICE BOX 730 POST OFFICE BOX 730
JACKSON, MISSISSIPPI 39205 JACKSON, MISSISSIPPI 39205
TELEPHONE NUMBER: (601) 354-8497 TELEPHONE NUMBER: (601) 354-8497
(Address, including zip code, (Name, address, including zip
and telephone number, including code, and telephone number,
area code of registrant's including area code of agent
principal executive offices) for service)
Copies to:
L. Keith Parsons, Esq. Bob D. Tucker, Esq.
Watkins Ludlam & Stennis, P.A. Kantrow, Spaht, Weaver & Blitzer
633 North State Street (APLC)
Post Office Box 427 445 North Boulevard
Jackson, Mississippi 39205-0427 Post Office Box 2997
Telephone Number: (601) 949-4701 Baton Rouge, Louisiana 70821
Telephone Number: (504) 383-4703
Approximate date of commencement of proposed sale of securities to the public:
The Effective Date of the merger of NBC Financial Corporation into Deposit
Guaranty Corp. as described in the attached Proxy Statement/Prospectus.
If the securities being registered on this form are being offered in
conjunction with the formation of a holding company and there is compliance
with General Instruction G, check the following box. /__/
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITITES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
<PAGE> 2
DEPOSIT GUARANTY CORP.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
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Caption or Location
in Proxy
Items in Form S-4 Statement/Prospectus
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1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus....................... Cover Page of
Registration Statement;
Cross Reference Sheet;
Cover Page of the Proxy
Statement/Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus........ Available Information;
Incorporation of
Certain Documents by
Reference
3. Risk Factors, Ratio of Earnings
to Fixed Charges and Other
Information...................... Summary
4. Terms of the Transaction......... Summary; The Mergers; Comparative Rights of
Shareholders
5. Pro Forma Financial Information.. Not Applicable
6. Material Contracts with the
Company Being Acquired........... Not Applicable
7. Additional Information Required
for Reoffering by Persons and
Parties Deemed to be Under-
writers.......................... Not Applicable
8. Interest of Named Experts and
Counsel.......................... Legal Opinion; Experts
9. Disclosure of Commission
Position on Indemnification
for Securities Act Liabilities... Not Applicable
10. Information with Respect to
S-3 Registrants.................. Available Information;
Incorporation of
Certain Documents by
Reference
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11. Incorporation of Certain Infor-
mation by Reference.............. Available Information;
Incorporation of
Certain Documents by
Reference
12. Information with Respect to S-2
or S-3 Registrants............... Not Applicable
13. Incorporation of Certain Infor-
mation by Reference.............. Not Applicable
14. Information with Respect to
Registrants Other Than S-2 or
S-3 Registrants.................. Not Applicable
15. Information with Respect to S-3
Companies........................ Not Applicable
16. Information with Respect to S-2
or S-3 Companies................. Not Applicable
17. Information with Respect to
Companies Other Than S-2 or
S-3 Companies.................... Information Concerning NBC Financial Corporation;
NBC Financial Corporation Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Index to NBC Financial Corporation
Financial Statements
18. Information if Proxies, Consents
or Authorizations Are to be
Solicited........................ Incorporation of Certain Documents by Reference;
Summary; Introduction; The Mergers--Interests of
Certain Persons in the Mergers; Dissenters' Rights;
Security Ownership of Principal Shareholders and
Management; Experts
19. Information if Proxies, Consents
or Authorizations Are Not to be
Solicited or in an Exchange
Offer............................ Not Applicable
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<PAGE> 4
NBC FINANCIAL CORPORATION
7777 JEFFERSON HIGHWAY
BATON ROUGE, LOUISIANA 70809
May 1, 1997
To Our Shareholders:
You are cordially invited to attend a Special Meeting (the "Meeting")
of Shareholders of NBC Financial Corporation ("NBC Financial Corporation") to
be held at 5:00 p.m. local time, on June 3, 1997 at the main office of NBC
Financial Corporation, 7777 Jefferson Highway, Baton Rouge, Louisiana.
At the Meeting, you will be asked to consider and vote upon a proposal
to approve an Agreement and Plan of Merger (the "Merger Agreement"), dated as
of February 20, 1997, by and among Deposit Guaranty Corp. ("Deposit Guaranty"),
a Mississippi corporation, Deposit Guaranty National Bank of Louisiana ("DGNB
Louisiana"), a national bank and a wholly-owned subsidiary of Deposit Guaranty,
on the one hand, and NBC Financial Corporation and its wholly-owned subsidiary,
Bank of Commerce (the "Bank"), on the other hand, pursuant to which (a) NBC
Financial Corporation will merge into Deposit Guaranty (the "Holding Company
Merger"), and (b) based on the number of shares of common stock and options to
acquire shares of common stock presently outstanding and assuming all options
are exercised, each outstanding share of NBC Financial Corporation common stock
will be converted into .75808 shares of Deposit Guaranty common stock as
determined pursuant to the Merger Agreement. Based on the closing sales price
of Deposit Guaranty common stock on the New York Stock Exchange on April 24,
1997 of $31.625, the value of .75808 shares of Deposit Guaranty common
stock was $23.97. Details of the proposal are set forth in the accompanying
Proxy Statement/Prospectus, which you should read carefully.
AFTER CAREFUL CONSIDERATION, THE MERGER AGREEMENT HAS BEEN UNANIMOUSLY
APPROVED BY YOUR BOARD OF DIRECTORS. THE BOARD BELIEVES THE HOLDING COMPANY
MERGER IS IN THE BEST INTERESTS OF NBC FINANCIAL CORPORATION AND ITS
SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE
MERGER AGREEMENT. THE REASONS FOR SUCH RECOMMENDATION ARE SET FORTH IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS. FURTHERMORE, NBC FINANCIAL
CORPORATION'S FINANCIAL ADVISOR, NATIONAL CAPITAL CORPORATION, HAS ISSUED ITS
OPINION TO THE EFFECT THAT, AS OF THE DATE OF SUCH OPINION AND BASED UPON THE
CONSIDERATIONS DESCRIBED THEREIN, THE CONSIDERATION TO BE RECEIVED BY THE
HOLDERS OF NBC FINANCIAL CORPORATION COMMON STOCK PURSUANT TO THE HOLDING
COMPANY MERGER IS FAIR, FROM A FINANCIAL POINT OF VIEW, TO SUCH SHAREHOLDERS.
The Holding Company Merger presents an exceptional opportunity for
holders of NBC Financial Corporation common stock to join on favorable terms
in a combined enterprise with greater financial resources and a more
geographically diversified business. As a result of the proposed Holding
Company Merger, you, as a shareholder of Deposit Guaranty, will own common
stock in a bank holding company whose shares are actively traded on the New
York Stock Exchange.
We urge you to read the enclosed materials carefully so that you can
evaluate the Holding Company Merger for yourself.
All shareholders are invited to attend the Meeting in person. However,
in order to ensure that your shares will be represented at the Meeting, please
date, sign and promptly return the enclosed proxy card in the enclosed postage-
paid envelope, whether or not you plan to attend the Meeting. If you attend the
Meeting in person, you may, if you wish, vote personally on all matters brought
before the Meeting.
Very truly yours,
Thomas A. Boone
President
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY
<PAGE> 5
NBC FINANCIAL CORPORATION
7777 JEFFERSON HIGHWAY
BATON ROUGE, LOUISIANA 70809
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of NBC Financial Corporation:
Notice is hereby given that a Special Meeting (the "Meeting") of
Shareholders of NBC Financial Corporation ("NBC Financial Corporation") will be
held at the main office of NBC Financial Corporation, 7777 Jefferson Highway,
Baton Rouge, Louisiana on June 3, 1997 at 5:00 p.m. local time, for the
purpose of considering and voting upon the following matters:
1. To consider and vote upon a proposal to approve an Agreement
and Plan of Merger (the "Merger Agreement"), dated as of
February 20, 1997, by and among Deposit Guaranty Corp.
("Deposit Guaranty"), a Mississippi corporation, Deposit
Guaranty National Bank of Louisiana ("DGNB Louisiana"), a
national bank and a wholly-owned subsidiary of Deposit
Guaranty, on the one hand, and NBC Financial Corporation, and
its wholly-owned subsidiary, Bank of Commerce (the "Bank"), a
Louisiana state bank, on the other hand, pursuant to which (a)
NBC Financial Corporation will merge into Deposit Guaranty
(the "Holding Company Merger") and (b) based on the number of
shares of common stock and options to acquire shares of common
stock presently outstanding and assuming all options are
exercised, each outstanding share of NBC Financial Corporation
common stock will be converted into .75808 shares of Deposit
Guaranty common stock in accordance with the terms of the
Merger Agreement; and
2. To transact such other business as may lawfully come before
the meeting or any adjournment or postponement thereof.
DISSENTING SHAREHOLDERS WHO COMPLY WITH THE PROCEDURAL REQUIREMENTS OF
THE BUSINESS CORPORATION LAW OF LOUISIANA WILL BE ENTITLED TO RECEIVE PAYMENT
OF THE FAIR CASH VALUE OF THEIR SHARES IF THE HOLDING COMPANY MERGER IS
EFFECTED UPON APPROVAL BY LESS THAN EIGHTY PERCENT (80%) OF THE TOTAL VOTING
POWER OF NBC FINANCIAL CORPORATION.
Two-thirds of the voting power present at the Meeting must approve the
Merger Agreement. Only shareholders of record of NBC Financial Corporation
common stock as of the close of business on April 28, 1997, are entitled to
vote at the Meeting. All shareholders are invited to attend the Meeting in
person. However, in order to ensure that your shares will be represented at the
Meeting, please date, sign and promptly return the enclosed proxy card in the
enclosed postage-paid envelope, whether or not you plan to attend the Meeting.
Your proxy may be revoked by appropriate notice to the Secretary of NBC
Financial Corporation at any time prior to the voting thereof or by delivery of
a later-dated proxy. If you attend the Meeting in person, you may, if you wish,
vote personally on all matters brought before the Meeting.
By Order of the Board of Directors
----------------------------
Richard F. Norem, Sr.
Secretary
May 1, 1997
Baton Rouge, Louisiana
<PAGE> 6
PROSPECTUS PROXY STATEMENT
DEPOSIT GUARANTY CORP. NBC FINANCIAL CORPORATION
- -------------------- --------------------
422,581 SHARES OF SPECIAL MEETING OF
COMMON STOCK, NO PAR VALUE SHAREHOLDERS TO BE HELD
JUNE 3, 1997
This Proxy Statement/Prospectus is being furnished to holders of the
common stock of NBC Financial Corporation ("NBC Financial Corporation") in
connection with the solicitation of proxies by the Board of Directors of NBC
Financial Corporation for use at its Special Meeting (the "Meeting") of
Shareholders to be held on June 3, 1997. This Proxy Statement/Prospectus and
accompanying proxy cards were first mailed to shareholders of NBC Financial
Corporation on or about May 1, 1997.
At the Meeting, the holders of NBC Financial Corporation common stock,
$1.00 par value ("NBC Financial Corporation Common Stock"), will be asked to
approve the Agreement and Plan of Merger (the "Merger Agreement"), dated as of
February 20, 1997, by and among Deposit Guaranty Corp. ("Deposit Guaranty"), a
Mississippi corporation, Deposit Guaranty National Bank of Louisiana ("DGNB
Louisiana"), a wholly-owned subsidiary of Deposit Guaranty, on the one hand,
and NBC Financial Corporation and its wholly-owned subsidiary, Bank of Commerce
(the "Bank"), a Louisiana state bank, on the other hand, pursuant to which NBC
Financial Corporation will merge into Deposit Guaranty (the "Holding Company
Merger") and the Bank will merge into DGNB Louisiana (the "Bank Merger", and
together with the Holding Company Merger, the "Mergers"). Upon consummation of
the Mergers, based on the number of shares of common stock and options
presently outstanding each outstanding share of NBC Financial Corporation
Common Stock, other than shares held by NBC Financial Corporation's
shareholders who perfect dissenters' rights, will be converted into .75808
shares of Deposit Guaranty common stock, no par value per share ("Deposit
Guaranty Common Stock"), and cash in lieu of any fractional shares, all in
accordance with the terms of the Merger Agreement. For a more complete
description of the Merger Agreement and the terms of the Mergers, see "The
Mergers." Based on the closing sales price of Deposit Guaranty Common Stock on
the New York Stock Exchange on April 24, 1997 of $31.625, the value of
.75808 shares of Deposit Guaranty Common Stock was $23.97. A conformed copy
of the Merger Agreement is attached to this Proxy Statement/Prospectus as
Exhibit A. For a more complete description of dissenters' rights, see
"Dissenters' Rights."
Deposit Guaranty has filed a Registration Statement on Form S-4 with
the Securities and Exchange Commission (the "Commission"), pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), covering up to
422,581 shares of Deposit Guaranty Common Stock to be issued in connection with
the Mergers. This document constitutes a Proxy Statement of NBC Financial
Corporation in connection with the Meeting and a Prospectus of Deposit Guaranty
with respect to the shares of Deposit Guaranty Common Stock to be issued upon
consummation of the Mergers. Each of Deposit Guaranty and NBC Financial
Corporation has furnished all information included herein with respect to it
and its consolidated subsidiaries.
No person is authorized to give any information or to make any
representation concerning the Mergers not contained in this Proxy
Statement/Prospectus and, if given or made, such information or representation
should not be relied upon as having been authorized. This Proxy
Statement/Prospectus does not constitute an offer to sell, or a solicitation of
an offer to purchase, the securities offered by this Proxy Statement/Prospectus,
or the solicitation of a proxy, in any jurisdiction, to or from any person to
whom it is unlawful to make such offer or solicitation of an offer or proxy
solicitation in such jurisdiction. Neither the delivery of this Proxy
Statement/Prospectus nor any distribution of the securities made under this
Proxy Statement/Prospectus shall, under any circumstances, create any
implication that there has been no change in the information set forth herein
since the date of this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus does not cover any resales of Deposit
Guaranty Common Stock to be received by NBC Financial Corporation's
shareholders upon consummation of the Holding Company Merger, and no person is
authorized to make use of this Proxy Statement/Prospectus in connection with
any such resale.
--------------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
The date of this Proxy Statement/Prospectus is May 1, 1997.
<PAGE> 7
AVAILABLE INFORMATION
Deposit Guaranty is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files periodic reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information filed by Deposit Guaranty can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street NW, Washington, D.C. 20549 and at the Commission's
Regional Offices located in the Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New
York 10048 and they are also available to the public at the web site maintained
by the Commission at "http://www.sec.gov." Copies of such material can also be
obtained from the Commission's Public Reference Section, Judiciary Plaza, 450
Fifth Street NW, Washington, D.C. 20549, at prescribed rates. In addition,
material filed by Deposit Guaranty can be inspected at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, on which
the Deposit Guaranty Common Stock is listed (symbol: DEP).
Deposit Guaranty has filed with the Commission a Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act
with respect to the common stock offered by this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement, certain portions of which have been omitted
pursuant to the Rules and Regulations of the Commission, and to which portions
reference is hereby made for further information with respect to Deposit
Guaranty and the securities offered hereby.
AS INDICATED BELOW, THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY
REFERENCE CERTAIN INFORMATION WITH RESPECT TO DEPOSIT GUARANTY, WHICH IS NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH INFORMATION OR
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN, ARE AVAILABLE WITHOUT CHARGE, UPON THE
WRITTEN OR ORAL REQUEST OF ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED. IN ORDER TO ENSURE TIMELY
DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY MAY 27, 1997, AND SUCH
REQUESTS SHOULD BE DIRECTED TO DEPOSIT GUARANTY'S PRINCIPAL EXECUTIVE OFFICES
AT 210 EAST CAPITOL STREET, JACKSON, MISSISSIPPI 39201, ATTENTION: ARLEN L.
MCDONALD, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, TELEPHONE
NUMBER (601) 354-8497.
<PAGE> 8
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Deposit Guaranty with the Commission
are hereby incorporated by reference:
(1) Deposit Guaranty's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996;
(2) The description of capital stock contained in Item 14 of
Deposit Guaranty's Registration Statement on Form 10 filed
April 21, 1970, Item 4 of Deposit Guaranty's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1982, Item 4 of
Deposit Guaranty's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1986, Item 4 of Deposit Guaranty's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1987, and Item 3a of Deposit Guaranty's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996, relating to
the description of Deposit Guaranty's Common Stock.
All documents filed by Deposit Guaranty pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior
to the date of the Meeting of shareholders of NBC Financial Corporation are
hereby incorporated by reference into this Proxy Statement/Prospectus and shall
be deemed a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated by reference shall
be deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or in any other subsequently filed document which
also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as so modified or superseded.
<PAGE> 9
TABLE OF CONTENTS
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Page
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SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Purpose of the Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Date, Time and Place of the Meeting; Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recommendation of the Boards of Directors; Reasons for the Mergers . . . . . . . . . . . . . . . . . . . . . . 2
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Other Conditions to Consummation of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exchange of NBC Financial Corporation Certificates; No Fractional Shares . . . . . . . . . . . . . . . . . . 3
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Recent Market Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
NBC Financial Corporation and Subsidiary-Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . 6
Deposit Guaranty Corp. and Subsidiaries - Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 7
Comparative Per Share Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Record Date; Voting Rights; Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
THE MERGERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Structure and Terms of the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Background of and Reasons for the Mergers - NBC Financial Corporation . . . . . . . . . . . . . . . . . . . 11
Reasons for the Mergers - Deposit Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Other Conditions to the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Interests of Certain Persons in the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exchange of NBC Financial Corporation Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Amendment; Waiver; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Conduct of Business Pending the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Resales of Deposit Guaranty Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Expenses and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
DISSENTERS' RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Filing Written Objection and Vote Against the Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Notice of the Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Written Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Appraisal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Payment and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 10
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<S> <C>
COMPARATIVE RIGHTS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Cumulative Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Limitations on Directors' and Officers' Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Supermajority Voting Requirements; Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Vacancies in the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Amendment of the Articles of Incorporation or Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Special Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Shareholder Proposals and Nominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Authorized Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
INFORMATION CONCERNING NBC FINANCIAL CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Description of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Market Prices and Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
SUPPLEMENTAL FINANCIAL INFORMATION OF NBC FINANCIAL CORPORATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Investment Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Risk Elements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Earning Asset/Interest Bearing Liabilities Yields and Rates . . . . . . . . . . . . . . . . . . . . . . . . 31
Volume/Rate Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Return on Equity and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Loan Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Summary of Loan Loss Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Capital Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Ownership of Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Ownership of Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
NBC FINANCIAL CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Provision for Possible Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Noninterest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Noninterest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
LEGAL OPINION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
INDEX TO NBC FINANCIAL CORPORATION FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
</TABLE>
Exhibit A - Agreement and Plan of Merger
Exhibit B - Fairness Opinion of National Capital Corporation
Exhibit C - Section 131 of the Louisiana Business Corporation Law
<PAGE> 11
SUMMARY
The following is a brief summary of certain information contained
elsewhere in this Proxy Statement/Prospectus and the documents incorporated
herein by reference. This summary is necessarily incomplete and is subject to
and qualified in its entirety by reference to the more detailed information and
financial statements contained elsewhere in this Proxy Statement/Prospectus,
including the Exhibits and the documents incorporated in this Proxy
Statement/Prospectus by reference. Certain capitalized terms used in this
summary are defined elsewhere in this Proxy Statement/Prospectus.
PURPOSE OF THE MEETING
The purpose of the Meeting is to consider and vote upon a proposal to
approve an Agreement and Plan of Merger, dated February 20, 1997 (the "Merger
Agreement"), by and among Deposit Guaranty Corp. ("Deposit Guaranty"), a
Mississippi corporation, Deposit Guaranty National Bank of Louisiana ("DGNB
Louisiana"), a national banking association, on the one hand, and NBC Financial
Corporation ("NBC Financial Corporation"), a Louisiana corporation and its
wholly- owned subsidiary, Bank of Commerce (the "Bank"), a Louisiana state
bank, on the other hand, pursuant to which, among other things, (a) NBC
Financial Corporation will be merged into Deposit Guaranty (the "Holding
Company Merger"), (b) the Bank will be merged into DGNB Louisiana (the "Bank
Merger" and together with the Holding Company Merger, the "Mergers"), and (c)
on the effective date of the Mergers (the "Effective Date"), each outstanding
share of NBC Financial Corporation common stock, $1.00 par value per share
("NBC Financial Corporation Common Stock"), will be converted into a number of
shares of common stock, no par value per share, of Deposit Guaranty ("Deposit
Guaranty Common Stock") determined by dividing 422,581 by the number of shares
of NBC Financial Corporation Common Stock outstanding on the date immediately
preceding the Effective Date. Based on the number of shares of NBC Financial
Corporation Common Stock and options to acquire shares of NBC Financial
Corporation Common Stock outstanding on April 28, 1997, and assuming all
options are exercised, NBC Financial Corporation shareholders will receive
.75808 shares of Deposit Guaranty Common Stock for each share of NBC Financial
Corporation Common Stock. Based on the closing sales price of Deposit Guaranty
Common Stock on the New York Stock Exchange on April 24, 1997 of $31.625, the
value of .75808 shares of Deposit Guaranty Common Stock was $23.97. As a result
of the Mergers, the business and properties of NBC Financial Corporation will
become the business and properties of Deposit Guaranty, the business and
properties of the Bank will become the business and properties of DGNB
Louisiana, and holders of NBC Financial Corporation Common Stock will become
shareholders of Deposit Guaranty, except for any such holders who perfect
dissenters' rights.
DATE, TIME AND PLACE OF THE MEETING; RECORD DATE
A Special Meeting (the "Meeting") of the Shareholders of NBC Financial
Corporation will be held on June 3, 1997, at 5:00 p.m. at the main office of
NBC Financial Corporation, 7777 Jefferson Highway, Baton Rouge, Louisiana. The
Board of Directors of NBC Financial Corporation has fixed the close of business
on April 28, 1997, as the record date (the "Record Date") for determining
holders of outstanding shares of NBC Financial Corporation Common Stock
entitled to notice of and to vote at the Meeting. Only holders of NBC Financial
Corporation Common Stock of record on the books of NBC Financial Corporation at
the close of business on the Record Date are entitled to vote at the Meeting or
at any adjournment or postponement thereof. As of the Record Date, there were
469,660 shares of NBC Financial Corporation Financial Common Stock issued and
outstanding, each of which is entitled to one vote. See "Introduction --
General" and "Introduction -- Record Date; Voting Rights; Proxies."
VOTE REQUIRED
Two-thirds of the total voting power of NBC Financial Corporation
present at the Meeting must approve the Merger Agreement. As of the Record
Date, the executive officers and directors of NBC Financial Corporation as a
group had the power to vote approximately 238,157 shares of NBC Financial
Corporation Common Stock, representing approximately 43% of the outstanding
shares, all of which are expected to be voted in favor of approval of the
Merger Agreement.
1
<PAGE> 12
THE PARTIES
Deposit Guaranty Corp. Deposit Guaranty is a bank holding company
headquartered at 210 East Capitol Street, Jackson, Mississippi 39201, telephone
(601) 354-8497. Its principal subsidiaries are Deposit Guaranty National Bank,
a national banking association with its principal office in Jackson,
Mississippi; Commercial National Bank, a national banking association with its
principal office in Shreveport, Louisiana; Deposit Guaranty National Bank of
Louisiana, a national banking association with its principal office in Hammond,
Louisiana; Merchants National Bank, a national banking association with its
principal office in Fort Smith, Arkansas; and three (3) full-service mortgage
banking firms, Deposit Guaranty Mortgage Company, headquartered in Jackson,
Mississippi, McAfee Mortgage Company, headquartered in Lubbock, Texas and First
Mortgage Corp., headquartered in Omaha, Nebraska. Deposit Guaranty, through its
subsidiaries, provides comprehensive corporate, commercial, correspondent and
individual banking services, mortgage loan servicing, and personal and
corporate trust services.
As of December 31, 1996, Deposit Guaranty had total assets of $6.4
billion, total deposits of $5.0 billion, total loans of $4.0 billion and
shareholders' equity of $581 million. Based on total assets at December 31,
1996, Deposit Guaranty ranked first among Mississippi-based bank holding
companies.
Deposit Guaranty National Bank of Louisiana. DGNB Louisiana is a
national bank headquartered at 201 NW Railroad Ave., Hammond, Louisiana. DGNB
Louisiana provides a full complement of consumer and commercial banking
services in Tangipahoa, Livingston, Morehouse, Madison, Ascension, Jefferson,
Richland, St. Tammany, Orleans and Ouachita Parishes in Louisiana.
NBC Financial Corporation. NBC Financial Corporation is a Louisiana
bank holding company headquartered at 7777 Jefferson Highway, Baton Rouge,
Louisiana 70809, telephone number (504) 234-7777. Through its sole bank
subsidiary, the Bank, NBC Financial Corporation provides various consumer and
commercial banking services in East Baton Rouge Parish in the State of
Louisiana.
Bank of Commerce. The Bank is a Louisiana state bank, which offers
consumer and commercial banking services through its main office at 7777
Jefferson Highway and its branch office at 300 N. Lobdell Avenue in Baton
Rouge, East Baton Rouge Parish, Louisiana. The Bank offers an array of deposit
services, including demand accounts, NOW accounts, certificates of deposit and
money market accounts, and provides safe deposit boxes, night depository,
individual retirement accounts and electronic and drive-in banking services.
The lending activities of the Bank consist principally of real estate, consumer
and commercial loans. As of December 31, 1996, the Bank had total assets of
$69.3 million, total deposits of $63.4 million, total loans of $42.7 million
and shareholders' equity of $5.5 million.
RECOMMENDATION OF THE BOARDS OF DIRECTORS; REASONS FOR THE MERGERS
THE BOARD OF DIRECTORS OF NBC FINANCIAL CORPORATION (THE "NBC
FINANCIAL CORPORATION BOARD") HAS DETERMINED THAT THE MERGERS ARE IN THE BEST
INTERESTS OF NBC FINANCIAL CORPORATION AND ITS SHAREHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF NBC FINANCIAL CORPORATION COMMON STOCK VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT. The NBC Financial Corporation Board believes
that the Mergers provide significant value to the holders of NBC Financial
Corporation Common Stock and enables the shareholders to participate in
opportunities for growth that the Mergers make possible.
In recommending approval of the Merger Agreement to the holders of NBC
Financial Corporation Common Stock, the NBC Financial Corporation Board
considered, among other factors, the financial terms of the Merger Agreement;
the financial condition and results of operations of, and prospects for, each
of NBC Financial Corporation and Deposit Guaranty; the likelihood that NBC
Financial Corporation will experience significantly increased competitive
pressures in its market area from larger banking and other financial
institutions; the liquidity that the mergers will afford holders of NBC
Financial Corporation Common Stock; the respective dividend policies of Deposit
Guaranty and NBC Financial Corporation; the tax-free nature of the Mergers to
the NBC Financial Corporation shareholders for federal and state income tax
purposes; and certain non-financial factors. See "The Mergers -- Background of
and Reasons for the Mergers - NBC Financial Corporation."
2
<PAGE> 13
In addition, the NBC Financial Corporation Board has received the
opinion of National Capital ("National Capital") that the Exchange Ratio under
the Merger Agreement is fair from a financial point of view to the holders of
NBC Financial Corporation Common Stock. The opinion of National Capital is
attached as Exhibit B and should be read in its entirety. See "The Mergers --
Opinion of Financial Advisor."
The Board of Directors of Deposit Guaranty has approved the Merger
Agreement because it believes that the Merger will enhance Deposit Guaranty's
earnings capacity by enabling it to deliver products and provide services to a
larger geographic customer base and that the combination of Deposit Guaranty
and NBC Financial Corporation can take advantage of increased overall
efficiencies and economies of scale. See "The Mergers -- Reasons for the
Mergers - Deposit Guaranty."
OPINION OF FINANCIAL ADVISOR
National Capital, NBC Financial Corporation's financial advisor, has
rendered its opinion that the consideration to be received by the shareholders
of NBC Financial Corporation pursuant to the Merger Agreement, when taken as a
whole, is fair to NBC Financial Corporation and its shareholders from a
financial point of view. The opinion of National Capital is attached hereto as
Exhibit B, and should be read in its entirety with respect to the assumptions
made therein and other matters considered. See "The Mergers -- Opinion of
Financial Advisor" for further information regarding, among other things, the
selection of National Capital and its compensation arrangement in connection
with the Merger Agreement.
REGULATORY APPROVALS
It is a condition to the consummation of the Mergers that all required
regulatory approvals, including the approval of the Office of the Comptroller
of the Currency (the "OCC"), be obtained. OCC approval is anticipated in May,
1997, although there can be no assurance that such approval will be forthcoming
or as to the conditions to or timing of such approval. See "The Mergers --
Regulatory Approvals."
OTHER CONDITIONS TO CONSUMMATION OF THE MERGERS
In addition to regulatory approvals and the approval of the Merger
Agreement by the requisite vote of the holders of NBC Financial Corporation
Common Stock, the respective obligations of each party under the Merger
Agreement are subject, among other conditions, to receipt of an opinion of
Watkins Ludlam & Stennis, P.A. substantially to the effect that the
transactions contemplated by the Merger Agreement will be treated for federal
income tax purposes as a tax-free reorganization under Section 368 of the
Internal Revenue Code of 1986 (the "Code"), and the absence of a material
adverse change in the financial condition, results of operations or business of
the other party's consolidated group. See "The Mergers -- Other Conditions to
the Mergers" for additional information concerning the conditions to
consummation of the Mergers.
EXCHANGE OF NBC FINANCIAL CORPORATION CERTIFICATES; NO FRACTIONAL SHARES
As soon as practicable after the Effective Date, Deposit Guaranty
National Bank (the "Exchange Agent") will mail to each holder of record of NBC
Financial Corporation Common Stock, a letter of transmittal and instructions
for use in effecting the surrender of the certificates which, immediately prior
to the Effective Date, represented issued and outstanding shares of NBC
Financial Corporation Common Stock in exchange for certificates representing
Deposit Guaranty Common Stock. See "The Mergers -- Exchange of NBC Financial
Corporation Certificates." Cash will be paid in lieu of any fractional shares
of Deposit Guaranty Common Stock. See "The Mergers -- Structure and Terms of
the Mergers." Certificates representing NBC Financial Corporation Common Stock
should not be surrendered until the letter of transmittal is received.
EFFECTIVE DATE
If the Merger Agreement is approved by the requisite vote of the
holders of NBC Financial Corporation Common Stock, the Mergers are approved by
all required regulatory agencies and the other conditions to the Mergers are
satisfied or waived (where permissible), the Mergers will become effective at
the date (the "Effective Date") a certificate of merger (the "Certificate of
Merger") is filed with the Secretary of State of Louisiana, or as of such later
date to which Deposit Guaranty and NBC Financial Corporation agree, which may
be specified in the Certificate of Merger to be filed with the Louisiana
Secretary of State pursuant to the Business Corporation Law of the State of
Louisiana (the "Louisiana BCL"). It is expected that the Effective Date will
occur in mid-1997; however, there can be no assurance that the conditions to
the
3
<PAGE> 14
Mergers will be satisfied or waived so that the Mergers can be consummated.
See "The Mergers -- Effective Date" and "The Mergers -- Other Conditions to the
Mergers."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of NBC Financial Corporation's management and Board of
Directors have interests in the Mergers in addition to their interests as
shareholders of NBC Financial Corporation generally. Those interests include,
among others, provisions in the Merger Agreement regarding indemnification and
insurance and eligibility to participate in certain Deposit Guaranty employee
benefit plans. See "The Mergers -- Interests of Certain Persons in the
Mergers."
TERMINATION
Among other reasons, the Merger Agreement may be terminated at any
time prior to the Effective Date (i) in the event the Merger Agreement is not
approved by the shareholders of NBC Financial Corporation at the Meeting, (ii)
if the number of shares of NBC Financial Corporation Common Stock, the holders
of which perfect dissenters' rights, exceeds ten percent (10%) of the
outstanding shares of NBC Financial Corporation Common Stock, or (iii) if the
Closing has not occurred by December 31, 1997. The Merger Agreement may also be
terminated by mutual consent. See "The Mergers -- Amendment; Waiver;
Termination."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Mergers is conditioned upon receipt by each of the
parties to the Merger Agreement of an opinion of counsel substantially to the
effect that the Mergers will be treated, for federal income tax purposes, as
tax-free reorganizations, with the result that no gain or loss will be
recognized by NBC Financial Corporation or by holders of NBC Financial
Corporation Common Stock who exchange all of their NBC Financial Corporation
Common Stock solely for Deposit Guaranty Common Stock pursuant to the Mergers
(except with respect to cash, if any, received in lieu of fractional shares).
NBC Financial Corporation's shareholders are urged to consult their own tax
advisors as to the specific tax consequences to them of the Mergers. See "The
Mergers -- Certain Federal Income Tax Consequences."
ACCOUNTING TREATMENT
Deposit Guaranty intends to use the purchase method of accounting to
account for the Mergers upon consummation. See "The Mergers -- Accounting
Treatment."
DISSENTERS' RIGHTS
Unless the Merger Agreement is approved at the Meeting by the
affirmative vote of 80% or more of the total voting power of NBC Financial
Corporation, by complying with the specific procedures required by Louisiana
law and described herein, holders of NBC Financial Corporation Common Stock
will have the right to dissent from the Holding Company Merger, in which event,
if the Holding Company Merger is consummated, such shareholders may be entitled
to receive in cash the fair value of their shares of NBC Financial Corporation
Common Stock, in lieu of shares of Deposit Guaranty Common Stock issuable under
the Merger Agreement. See "Dissenters' Rights" and Exhibit C hereto.
RECENT MARKET PRICES
On February 19, 1997, the business day preceding the date that Deposit
Guaranty, DGNB Louisiana, NBC Financial Corporation and the Bank entered into
the Merger Agreement, the closing sales price for a share of Deposit Guaranty
Common Stock, as quoted on the New York Stock Exchange, was $31.75. No
assurance can be given as to the market price of Deposit Guaranty Common Stock
on the Effective Date. On April 24, 1997, the closing sales price for a share
of Deposit Guaranty Common Stock was $31.625.
NBC Financial Corporation Common Stock is not actively traded, and
there is no established market for NBC Financial Corporation Common Stock. On
the Record Date, there were approximately 110 holders of record of NBC
Financial Corporation Common Stock, and an additional 6 holders of options to
purchase NBC Financial Corporation Common Stock.
4
<PAGE> 15
SELECTED FINANCIAL DATA
The following selected financial data for Deposit Guaranty and NBC
Financial Corporation has been derived from the consolidated financial
statements of Deposit Guaranty and NBC Financial Corporation. The information
set forth below should be read in conjunction with the consolidated financial
statements of Deposit Guaranty and NBC Financial Corporation incorporated by
reference or included elsewhere herein, and NBC Financial Corporation
Management's Discussion and Analysis of Financial Condition and Results of
Operations, included elsewhere herein.
5
<PAGE> 16
NBC FINANCIAL CORPORATION AND SUBSIDIARY-SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
Interest income $4,896 $4,427 $3,196 $2,825 $3,060
Interest Expense 2,376 2,033 1,215 1,191 1,395
-----------------------------------------------------------
Net interest income 2,520 2,394 1,981 1,634 1,665
Provision for possible loan losses 168 65 -- (60) (575)
-----------------------------------------------------------
Net interest income after provision for
possible loan losses 2,352 2,329 1,981 1,694 2,240
Other operating income 321 233 (72) 135 162
Other operating expenses 1,988 1,844 1,618 1,387 1,590
-----------------------------------------------------------
Income before income taxes and cumulative
effect of change in accounting principle 685 718 291 442 812
Income tax expense (benefit) 226 71 (77) 43 --
-----------------------------------------------------------
Income before cumulative effect of change
in accounting principle 459 647 368 399 812
Cumulative effect of change in accounting
principle -- -- -- 102 --
-----------------------------------------------------------
Net income $459 $647 $368 $501 $812
===========================================================
NET INCOME PER COMMON SHARE (1)
Income before cumulative effect of change
in accounting principle $.85 $1.22 $.68 $.80 $1.75
Cumulative effect of change in accounting
principle -- -- -- .23 --
-----------------------------------------------------------
Net income per common share $.85 $1.22 $.68 $1.03 $1.75
===========================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 523,997 502,200 488,000 453,332 445,952
CASH DIVIDENDS PER SHARE $.12 $.12 $.03 -- --
STATEMENTS OF CONDITION - AVERAGES
Total assets $62,283 $53,445 $43,941 $41,611 $42,077
Earning assets 57,127 47,997 40,569 38,505 38,476
Securities 15,860 13,534 13,136 14,244 14,057
Loans 39,520 34,180 26,817 23,196 22,481
Deposits 57,156 49,185 40,673 37,584 38,721
Total stockholders' equity 5,125 4,629 4,149 3,870 3,191
SELECTED RATIOS
Return on average assets .74% 1.21% .84% 1.20% 1.93%
Return on average equity 8.96 13.98 8.87 12.95 25.45
Net interest margin - tax equivalent 4.43 4.99 4.88 4.24 4.33
Loans to deposits 69.14 69.49 65.93 61.72 58.06
Allowance for possible loan losses to loans 1.51 1.45 1.57 1.97 2.45
Net charge-offs (recoveries) to average loans .19 (.03) (.01) .05 (.19)
Dividend payout 14.12 9.84 4.41 -- --
Average equity to average assets 8.23 8.66 9.44 9.30 7.58
Leverage ratio 8.54 9.42 9.18 9.91 8.60
</TABLE>
(1) Net income is adjusted for the current year's 8% cumulative dividend
payable to preferred shareholders in calculating net income per common share.
All share data reflects a 4 for 1 stock split declared in 1995.
6
<PAGE> 17
DEPOSIT GUARANTY CORP. AND SUBSIDIARIES - SELECTED FINANCIAL DATA
(In Thousands Except Per Share
Amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF EARNINGS
Interest income $ 432,222 $ 402,704 $ 307,272 $ 299,327 $ 322,114
Interest expense 182,688 173,432 125,881 124,687 155,459
------------------------------------------------------------------------------
Net interest income 249,534 229,272 181,391 174,640 166,655
Provision for possible loan losses 5,340 2,160 (4,750) (16,000) 10,378
------------------------------------------------------------------------------
Net interest income after provision
for possible loan losses 244,194 227,112 186,141 190,640 156,277
Other operating income 117,245 91,989 93,499 74,781 67,977
Other operating expense 237,208 211,452 180,047 171,567 164,470
------------------------------------------------------------------------------
Income before income taxes 124,231 107,649 99,593 93,854 59,784
Income tax expense 40,621 35,029 32,463 27,302 14,270
------------------------------------------------------------------------------
Net income $ 83,610 $ 72,620 $ 67,130 $ 66,552 $ 45,514
==============================================================================
NET INCOME PER SHARE
Primary $ 2.16 $ 1.89 $ 1.90 $ 1.89 $ 1.34
Fully diluted 2.16 1.89 1.90 1.89 1.30
WEIGHTED AVERAGE SHARES OUTSTANDING
Primary 38,760,192 38,431,162 35,336,124 35,299,704 34,067,328
Fully diluted 38,760,192 38,431,162 35,336,124 35,299,704 34,930,564
CASH DIVIDENDS PER SHARE $ .72 $ .61 $ .53 $ .47 $ .40
STATEMENTS OF CONDITION - AVERAGES
Total assets $ 6,026,548 $ 5,571,697 $ 4,940,977 $ 4,826,726 $ 4,777,596
Earning assets 5,395,343 4,961,261 4,413,938 4,333,740 4,275,345
Securities available for sale 1,293,830 186,194 712,184 1,308,634 --
Investment securities 130,255 1,365,070 718,891 396,011 1,616,658
Loans 3,774,490 3,273,408 2,581,724 2,293,416 2,261,034
Deposits 4,750,894 4,438,797 3,997,038 3,867,669 3,876,927
Long-term debt 67,888 -- -- -- 6,320
Total stockholders' equity 551,754 498,023 429,967 367,592 315,833
SELECTED RATIOS
Return on average assets 1.39% 1.30% 1.36% 1.38% .95%
Return on average equity 15.15 14.58 15.61 18.10 14.41
Net interest margin-tax equivalent 4.77 4.75 4.24 4.18 4.12
Allowance for possible loan
losses to loans 1.56 1.64 1.95 2.56 3.30
Net charge-offs (recoveries) to
average loans .10 .12 .10 (.14) 1.02
Dividend payout 33.10 32.01 27.89 24.67 29.96
Average equity to average assets 9.15 8.94 8.70 7.62 6.61
Leverage ratio 8.23 7.87 8.43 8.13 6.80
Tier I risk-based capital 11.42 11.05 12.49 13.28 12.00
Total risk-based capital 12.67 12.30 13.75 14.54 13.27
</TABLE>
All share data reflects a 2 for 1 stock split declared in 1996.
7
<PAGE> 18
COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain historical comparative
information and certain pro forma and equivalent pro forma information
with respect to income per share, book value per share and cash
dividends per share for the Deposit Guaranty Common Stock and the NBC
Financial Corporation Common Stock. The information that follows should
be read in conjunction with the audited historical financial statements
and notes thereto of Deposit Guaranty incorporated by reference herein
and the audited historical financial statements and notes thereto of
NBC Financial Corporation included in this Proxy Statement/Prospectus.
The comparative pro forma and equivalent pro forma data have been
included herein for comparative purposes only and do not purport to be
indicative of the results of operations or financial condition that
actually would have resulted had the Holding Company Merger occurred at
the beginning of the period or the results of operations or financial
condition that may be obtained in the future.
<TABLE>
<CAPTION>
Pro Forma
-------------------------------
Deposit
Guaranty and
Historical NBC Financial NBC Financial
--------------------------- Corporation Corporation
Deposit NBC Financial Pro Forma Pro Forma
Per Common Share Guaranty Corporation Combined (a) Equivalent(b)
- ---------------- -------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
NET INCOME (c)
For the year ended
December 31,
1996 $ 2.16 $ .85 $ 2.15 $ 1.63
1995 1.89 1.22 1.89 1.43
CASH DIVIDENDS (d)
For the year ended
December 31,
1996 $ .72 $ .12 $ .72 $ .54
1995 .61 .12 .61 .46
BOOK VALUE (e)
As of December 31, 1996 $14.83 $11.71 $14.83 $11.25
As of December 31, 1995 13.91 11.02 13.91 10.54
</TABLE>
(a) In accordance with Generally Accepted Accounting Principles, Deposit
Guaranty will account for the Holding Company Merger using the
purchase method of accounting. Deposit Guaranty has been authorized by
its Board of Directors to repurchase up to 100% of the Deposit
Guaranty Common Stock to be issued in the Holding Company Merger. The
pro forma calculations assume a 100% repurchase.
(b) NBC Financial Corporation pro forma equivalent amounts are computed by
multiplying the pro forma combined amounts by the Exchange Ratio of
.75808.
(c) Net income per common share is based on weighted average common shares
outstanding, adjusted for stock split.
(d) Pro forma cash dividends represent historical cash dividends of
Deposit Guaranty, adjusted for stock split.
(e) Book value per common share, adjusted for stock split, is based on
total period-end shareholders' equity.
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<PAGE> 19
INTRODUCTION
GENERAL
This Proxy Statement/Prospectus is being furnished to holders of NBC
Financial Corporation Common Stock in connection with the solicitation by the
Board of Directors of NBC Financial Corporation of proxies for use at the
Meeting of Shareholders to be held at 5:00 p.m. local time, on June 3, 1997 at
the main office of NBC Financial Corporation, 7777 Jefferson Highway, Baton
Rouge, Louisiana, and at any adjournment or postponement thereof.
At the Meeting, shareholders will consider and vote upon a proposal to
approve the Merger Agreement, by and among Deposit Guaranty, DGNB Louisiana,
NBC Financial Corporation and the Bank, pursuant to which NBC Financial
Corporation will merge into Deposit Guaranty, the Bank will merge into DGNB
Louisiana and each share of NBC Financial Corporation Common Stock issued and
outstanding immediately prior to the Effective Date of the Mergers (except
Dissenting Shares, as hereinafter defined) will be converted into and
exchangeable for a number of shares of Deposit Guaranty Common Stock, as
determined pursuant to the Merger Agreement. As a result of the Mergers, the
holders of NBC Financial Corporation Common Stock (other than holders of
Dissenting Shares) will become shareholders of Deposit Guaranty.
This Proxy Statement/Prospectus constitutes a Proxy Statement of NBC
Financial Corporation with respect to the Meeting and a Prospectus of Deposit
Guaranty with respect to the shares of Deposit Guaranty Common Stock to be
issued in connection with the Mergers. The information in this Proxy
Statement/Prospectus concerning Deposit Guaranty and its subsidiaries and NBC
Financial Corporation and its subsidiary has been furnished by each of such
entities, respectively.
The principal executive office of Deposit Guaranty is located at 210
East Capitol Street, Jackson, Mississippi 39201, and its telephone number is
(601) 354-8497. The principal executive office of NBC Financial Corporation is
located at 7777 Jefferson Highway, Baton Rouge, Louisiana 70809, and its
telephone number is (504) 234-7777.
This Proxy Statement/Prospectus is first being mailed to holders of
NBC Financial Corporation Common Stock on or about May 1, 1997.
RECORD DATE; VOTING RIGHTS; PROXIES
The Board of Directors of NBC Financial Corporation has fixed the
close of business on April 28, 1997 as the Record Date for determining holders
of outstanding shares of NBC Financial Corporation Common Stock entitled to
notice of and to vote at the Meeting. Only holders of NBC Financial Corporation
Common Stock of record on the books of NBC Financial Corporation at the close
of business on the Record Date are entitled to vote at the Meeting or at any
adjournment or postponement thereof. Shares of NBC Financial Corporation
Preferred Stock are not entitled to vote on the Mergers. As of the Record Date,
there were 469,660 shares of NBC Financial Corporation Common Stock issued and
outstanding, each of which is entitled to one vote. The presence, in person or
by proxy, of a majority of the total voting power of NBC Financial Corporation
is necessary to constitute a quorum of the shareholders to take action at the
Meeting. Shares of NBC Financial Corporation Common Stock represented by
properly executed proxies will be voted in accordance with the instructions
indicated on the proxies or, if no instructions are indicated, will be voted
FOR the proposal to approve the Merger Agreement and in the discretion of the
proxy holders as to any other matter which may properly come before the Meeting
or any adjournment or postponement thereof. A shareholder who has given a proxy
may revoke it at any time before it is voted by (a) filing with the Secretary
of NBC Financial Corporation (i) a notice in writing revoking it, or (ii) a
duly executed proxy bearing a later date or (b) voting in person at the
Meeting.
Approval of the Merger Agreement requires the approval of two-thirds
of the voting power present at the Meeting. An abstention by a shareholder
present at the Meeting in person or by proxy will have the same effect as a
vote against the Merger Agreement, but failure to return a properly executed
proxy, or a broker submitting a proxy without exercising discretionary
authority with respect to approval of the Merger Agreement will not. As of the
Record Date, the executive officers and directors of NBC Financial Corporation
as a group had the power to vote approximately 238,157 shares of NBC Financial
Corporation Common Stock, representing approximately 43% of the outstanding
shares, all of which are expected to be voted in favor of approval of the
Merger Agreement.
9
<PAGE> 20
Deposit Guaranty's shareholders are not required to approve the Merger
Agreement or the issuance of shares of Deposit Guaranty Common Stock.
NBC Financial Corporation will bear the costs of soliciting proxies
from its shareholders. In addition to the use of the mail, proxies may be
solicited by the directors, officers and employees of NBC Financial Corporation
in person, or by telephone, telecopier or telegram. Such directors, officers
and employees will not be additionally compensated for such solicitation but
may be reimbursed for out-of-pocket expenses incurred in connection therewith.
Arrangements will also be made with custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of NBC
Financial Corporation Common Stock held of record by such persons, and NBC
Financial Corporation may reimburse such custodians, nominees and fiduciaries
for reasonable out-of-pocket expenses incurred in connection therewith.
THE MERGERS
GENERAL
The Merger Agreement provides that, subject to the satisfaction or
waiver (where permissible) of certain conditions, including, among other
things, the receipt of all necessary regulatory approvals, the expiration of
all related waiting periods and the approval of the holders of NBC Financial
Corporation Common Stock, NBC Financial Corporation will be merged with and
into Deposit Guaranty, and the Bank will be merged with and into DGNB
Louisiana. As a result of the Mergers, the separate corporate existence of NBC
Financial Corporation and the Bank will cease and the holders of NBC Financial
Corporation Common Stock (other than holders of Dissenting Shares) will become
shareholders of Deposit Guaranty. The date on which the Mergers will be
consummated is herein referred to as the "Effective Date." See "The Mergers --
Effective Date."
The description of the Merger Agreement included in this Proxy
Statement/Prospectus is qualified in its entirety by reference to the Merger
Agreement, which is incorporated herein by reference and a copy of which is
attached hereto as Exhibit A.
STRUCTURE AND TERMS OF THE MERGERS
Upon consummation of the Mergers, NBC Financial Corporation will be
merged with and into Deposit Guaranty and the NBC Financial Corporation Common
Stock issued and outstanding at the Effective Date (other than shares owned by
shareholders who, pursuant to the Louisiana BCL, perfect any right to receive
the fair value of such shares ("Dissenting Shares")) will be converted into and
exchangeable for a number of shares of Deposit Guaranty Common Stock determined
by dividing 422,581 by the number of shares of NBC Financial Corporation Common
Stock outstanding on the date immediately preceding the Effective Date (the
"Exchange Ratio"). Based on the number of shares of NBC Financial Corporation
Common Stock and options to acquire shares of NBC Financial Corporation Common
Stock outstanding on April 28, 1997, and assuming all options are exercised,
NBC Financial Corporation shareholders will receive .75808 shares of Deposit
Guaranty Common Stock for each share of NBC Financial Corporation Common Stock.
Based on the closing sales price of Deposit Guaranty Common Stock on the New
York Stock Exchange on April 24, 1997 of $31.625, the value of .75808 shares of
Deposit Guaranty Common Stock was $23.97. If prior to the Effective Date
Deposit Guaranty should split or combine Deposit Guaranty Common Stock, or pay
a dividend or other distribution in Deposit Guaranty Common Stock, then the
Exchange Ratio shall be appropriately adjusted to reflect such split,
combination, dividend or distribution.
The Exchange Ratio was determined by a process of arm's length
negotiations involving the managements of NBC Financial Corporation and Deposit
Guaranty and their respective financial advisors. The maximum number of shares
of Deposit Guaranty Common Stock which may be issued upon consummation of the
Mergers (422,581 shares) would constitute approximately 1.05% of the shares of
Deposit Guaranty Common Stock outstanding immediately after the Effective Date.
This calculation does not make any adjustment for fractional shares or
Dissenting Shares and is based upon the number of shares of NBC Financial
Corporation Common Stock and Deposit Guaranty Common Stock outstanding on the
Record Date.
No fractional shares of Deposit Guaranty Common Stock will be issued
in the Mergers. Any shareholder otherwise entitled to receive a fractional
share of Deposit Guaranty Common Stock will be paid a cash amount in lieu of
any such fractional share determined by multiplying (i) the closing sale price
of a share of Deposit Guaranty Common Stock on the date immediately preceding
10
<PAGE> 21
the Effective Date as quoted on the National Association of Securities Dealers
Automated Quotation System, by (ii) the fraction of a share of Deposit Guaranty
Common Stock to which such holder would otherwise be entitled.
BACKGROUND OF AND REASONS FOR THE MERGERS - NBC FINANCIAL CORPORATION
BACKGROUND. During the past several years, there has been a sharp
increase in the level of interest in and the number of acquisitions of
financial institutions in Louisiana. One of the responsibilities of the NBC
Financial Corporation Board is to consider various strategic alternatives,
including whether to affiliate with a larger, more diversified financial
organization, as viable opportunities might arise.
Through 1995 and 1996, a mutual interest developed between the Bank
and DGNB Louisiana in establishing a bank correspondent relationship. In the
course of developing that relationship, during the third quarter of 1996
Deposit Guaranty informally discussed with Thomas A. Boone the possibility of a
business combination between NBC Financial Corporation and Deposit Guaranty.
Following additional, preliminary discussions between representatives of NBC
Financial Corporation and Deposit Guaranty, NBC Financial Corporation engaged
National Capital for advice and assistance in evaluating and negotiating the
possible sale of NBC Financial Corporation to Deposit Guaranty. On December 4,
1996, NBC Financial Corporation and Deposit Guaranty entered into a
confidentiality agreement, and pursuant thereto NBC Financial Corporation
provided certain confidential information concerning its business to Deposit
Guaranty as part of the process of exploring a possible business combination.
Thereafter, in December, 1996, Deposit Guaranty made a proposal to
acquire NBC Financial Corporation. Over the next few weeks the parties engaged
in negotiations concerning the terms of a business combination. On January 24,
1997, representatives of Deposit Guaranty and NBC Financial Corporation reached
a preliminary agreement on the terms of a business combination, including
specification of the consideration to be received by the shareholders of NBC
Financial Corporation, subject to Deposit Guaranty's completion of due
diligence, approval by NBC Financial Corporation's and Deposit Guaranty's
respective boards of directors, and execution of a definitive agreement among
the parties. After reaching the preliminary agreement, Deposit Guaranty
conducted a review of the books and records of NBC Financial Corporation and
the Bank, and representatives of NBC Financial Corporation and Deposit Guaranty
negotiated the terms of the definitive Merger Agreement, subject to approval by
each party's board of directors.
The Mergers and the Merger Agreement were considered by the Boards of
Directors of NBC Financial Corporation and the Bank at meetings held for that
purpose on February 18, 1997. At those meetings, a representative of National
Capital advised the Boards regarding the proposed Mergers. Based on that
advice, and on review of the Mergers and Merger Agreement, the Boards of
Directors of NBC Financial Corporation and the Bank determined that the Mergers
were in the best interest of NBC Financial Corporation and the Bank and their
respective shareholders and approved the Merger Agreement.
REASONS FOR THE MERGERS. In reaching its decision that the Mergers are
in the best interest of NBC Financial Corporation and its shareholders, the NBC
Financial Corporation Board consulted with its financial advisor and NBC
Financial Corporation's management, and considered a number of factors,
including without limitation, the following:
(a) the financial condition and results of operations of, and
prospects for, each of NBC Financial Corporation and Deposit
Guaranty;
(b) the likelihood that NBC Financial Corporation will experience
significant, increased competitive pressures in its market from
larger banking and other financial institutions capable of
offering a broader array of technologically advanced financial
services and products;
(c) the lack of marketability of NBC Financial Corporation Common
Stock, the liquidity that would be offered to NBC Financial
Corporation's shareholders through the ownership of securities
of a publicly traded company such as Deposit Guaranty, and the
possibility of long-term appreciation in the value of Deposit
Guaranty Common Stock;
(d) the financial terms of the Holding Company Merger, including the
relationship of the value of the Deposit Guaranty Common Stock
issuable in the Holding Company Merger to the market value, book
value, and earnings per share of NBC Financial Corporation
Common Stock;
11
<PAGE> 22
(e) the respective dividend policies of Deposit Guaranty and NBC
Financial Corporation;
(f) the nonfinancial terms of the Holding Company Merger, including
the treatment of the Holding Company Merger as a tax-free
exchange of NBC Financial Corporation Common Stock for Deposit
Guaranty Common Stock for federal and state income tax purposes;
(g) the likelihood of the Mergers being approved by applicable
regulatory authorities without undue conditions or delay;
(h) the risk of Deposit Guaranty's withdrawing its offer if NBC
Financial Corporation decided to negotiate with other
institutions; and
(i) the opinion rendered by National Capital, NBC Financial
Corporation's financial advisor, to the effect that the terms of
the Holding Company Merger, as provided in the Merger Agreement,
are fair from a financial point of view to the holders of NBC
Financial Corporation Common Stock.
The NBC Financial Corporation Board did not assign any specific or
relative weight to the foregoing factors in its considerations. The NBC
Financial Corporation Board believes that the Holding Company Merger will
provide its shareholders with significant value and opportunities for growth.
BASED ON THE FOREGOING, THE NBC FINANCIAL CORPORATION BOARD
UNANIMOUSLY APPROVED THE MERGER AGREEMENT, AND UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF NBC FINANCIAL CORPORATION COMMON STOCK VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT.
REASONS FOR THE MERGERS - DEPOSIT GUARANTY
The Deposit Guaranty Board of Directors believes that by expanding
Deposit Guaranty's customer base into the Baton Rouge, Louisiana market area,
the Mergers should enhance Deposit Guaranty's earnings capacity by enabling it
to deliver products and provide services to that enlarged customer base, and by
permitting cost savings through consolidation of operations. In addition, the
Deposit Guaranty Board of Directors believes that the combination of Deposit
Guaranty and NBC Financial Corporation will allow Deposit Guaranty and NBC
Financial Corporation to increase overall efficiency and take advantage of
economies of scale in several areas. In evaluating the Mergers, the Deposit
Guaranty Board of Directors considered a variety of factors, including the
respective results of operations, financial condition and prospects of Deposit
Guaranty and NBC Financial Corporation; the compatibility and complimentary
nature of the respective businesses and managerial philosophies of Deposit
Guaranty and NBC Financial Corporation; and the relative prices paid in recent
acquisitions of financial institutions.
OPINION OF FINANCIAL ADVISOR
GENERAL. Pursuant to an engagement letter dated December 6, 1996, (the
"Engagement Letter"), NBC Financial Corporation engaged National Capital to
render its opinion that the consideration to be received by the shareholders of
NBC Financial Corporation pursuant to the Holding Company Merger, when taken as
a whole, is fair to NBC Financial Corporation and its shareholders from a
financial point of view. National Capital has extensive experience in
investment analysis and the valuation of bank and bank holding company
securities in connection with acquisitions and mergers, and valuations for
various other purposes. NBC Financial Corporation selected National Capital as
its financial advisor on the basis of its experience and expertise in merger
and acquisition transactions, and its reputation in the commercial banking and
investment banking communities.
Subsequent to the execution of the Merger Agreement and prior to
regulatory filings, National Capital delivered its formal written opinion that
the consideration to be received by the shareholders of NBC Financial
Corporation pursuant to the Merger Agreement, when taken as a whole, is fair to
NBC Financial Corporation and its shareholders from a financial point of view,
as of the date thereof. No limitations were imposed by NBC Financial
Corporation on National Capital with respect to the investigations made or the
procedures followed in rendering its opinions. The full text of National
Capital's written opinion to the NBC Financial Corporation Board of Directors,
which sets forth the assumptions made, matters considered, and limitations of
the review by National Capital, is attached hereto as Exhibit B and is
incorporated herein by reference and should be read carefully and in its
entirety in
12
<PAGE> 23
connection with this Proxy Statement/Prospectus. The following summary of
National Capital's opinion is qualified in its entirety by reference to the
full text of the opinion. National Capital's opinion is addressed to the NBC
Financial Corporation Board of Directors only and does not constitute a
recommendation to any shareholder of NBC Financial Corporation as to how such
shareholder should vote at the Meeting.
In connection with its written opinion, National Capital, among other
things: (i) met with officers of NBC Financial Corporation to discuss their
businesses, reserves, earnings, properties and prospects; (ii) reviewed certain
public financial information, and other data with respect to both Deposit
Guaranty and NBC Financial Corporation. This data includes consolidated
financial statements for recent years and interim periods through September 30,
1996, as well as other relevant financial and operating data furnished by NBC
Financial Corporation to National Capital; (iii) reviewed the Merger Agreement;
(iv) reviewed certain historical market prices and trading volumes of Deposit
Guaranty Common Stock; (v) analyzed market volatility studies of Deposit
Guaranty Common Stock; (vi) made inquiries regarding, and discussed the Merger
Agreement and other matters related thereto with NBC Financial Corporation's
counsel; and (vii) performed such other analyses and examinations as National
Capital deemed appropriate.
In connection with its review, National Capital did not independently
verify any of the foregoing information, and relied on such information and
assumed such information was complete and accurate in all material respects.
With respect to the financial forecasts for NBC Financial Corporation provided
to National Capital by NBC Financial Corporation's management, National Capital
assumed for purposes of its opinion that such forecasts were reasonably
prepared on bases reflecting the best available estimates and judgments of NBC
Financial Corporation's management at the time of preparation as to the
projected financial performance of NBC Financial Corporation and provided a
reasonable basis upon which National Capital could form its opinion. National
Capital also assumed that there were no material changes in NBC Financial
Corporation's or Deposit Guaranty's assets, financial condition, results of
operations, business or prospects since the respective dates of the last
financial statements made available to National Capital. National Capital
relied on advice of counsel to NBC Financial Corporation as to all legal
matters with respect to NBC Financial Corporation and the Merger Agreement.
National Capital is not expert in the evaluation of loan portfolios for
purposes of assessing the adequacy of the allowance for losses with respect
thereto and assumed for purposes of its opinion that such allowances for each
of NBC Financial Corporation and Deposit Guaranty are in the aggregate adequate
to cover such losses. In addition, National Capital did not review any
individual credit files, did not make an independent evaluation, appraisal or
physical inspection of the assets or individual properties of NBC Financial
Corporation or Deposit Guaranty, and was not furnished with any such
appraisals. Further, National Capital's opinion was based on economic, monetary
and market conditions existing as of the date of the Merger Agreement, and on
the assumption that the Merger Agreement will be consummated in accordance with
its terms, without any amendment thereto and without waiver by NBC Financial
Corporation of any of the conditions to its obligations thereunder.
Set forth below is a brief summary of the analysis performed by
National Capital in connection with its opinion.
ANALYSIS OF SELECTED BANK MERGER TRANSACTIONS. National Capital
reviewed the consideration paid in recently announced transactions whereby
certain banks were acquired. Specifically, National Capital reviewed
transactions involving acquisitions of banks in the United States announced or
to be acquired in such transactions since January 1, 1995 (the "National
Acquisitions") and acquisitions of selected Louisiana banks announced since
January 1, 1995 (the "Louisiana Acquisitions"). National Capital compiled
figures illustrating, among other things, the ratio of the premium (i.e.
purchase price in excess of book value) to core deposits, purchase price to
deposits, purchase price to book value and purchase price to last twelve-months
("LTM") earnings.
The figures for the National Acquisitions and the Louisiana
Acquisitions produced: (i) average percentage of premium (purchase price in
excess of book value) to core deposits of 11.2% and 10.8%, respectively; (ii)
average purchase price to deposits of 20.9% and 19.8%, respectively; (iii)
average multiple of purchase price to book value of 1.95x and 1.96x,
respectively; and (iv) average multiple of purchase price to LTM earnings of
17.6x and 14.4x, respectively.
In comparison, assuming the price of Deposit Guaranty common stock is
$31.00 per share, National Capital determined that the consideration to be
received by the holders of NBC Financial Corporation Common Stock in the
Holding Company Merger represented a percentage of premium to core deposits of
14.4%, a percentage of price to deposits of 21.0%, a multiple of price to book
value of 2.42x and a multiple of price to NBC Financial Corporation's earnings
for the twelve months ended December 31, 1996 of 25.9x.
No other company or transaction used as a comparison in the above
analyses is identical to NBC Financial Corporation or the Merger Agreement.
Accordingly, an analysis of the results of the foregoing is not mathematical;
rather, it involves complex
13
<PAGE> 24
considerations and judgments concerning the differences in financial and
operating characteristics of the companies and other factors that could affect
the public trading value of the companies to which NBC Financial Corporation
and the Merger Agreement are being compared.
CONTRIBUTION ANALYSIS. National Capital analyzed the contribution of
each of NBC Financial Corporation and Deposit Guaranty to, among other things,
common equity and net income of the pro forma combined companies for the twelve
month period ended December 31, 1996. This analysis showed, among other things,
that based on pro forma combined balance sheets and income statements for NBC
Financial Corporation and Deposit Guaranty as of December 31, 1996, NBC
Financial Corporation would have contributed 0.94% of the pro forma common
equity, and for the twelve months ended December 31, 1996, NBC Financial
Corporation would have contributed approximately 0.55% of the pro forma net
income of the combined companies. Assuming the consideration to be paid in the
Holding Company Merger for each share of NBC Financial Corporation Common Stock
equals 0.75808 shares of Deposit Guaranty Common Stock, the NBC Financial
Corporation shareholders would own approximately 1.09% of the combined
companies based on the weighted average shares outstanding during 1996.
The summary set forth above does not purport to be a complete
description of the analyses performed by National Capital. The preparation of a
fairness opinion necessarily is not susceptible to partial analysis or summary
description. National Capital believes that its analyses and the summary set
forth above must be considered as a whole and that selecting a portion of its
analyses and factors would create an incomplete view of the process underlying
the analyses set forth in its presentation to the NBC Financial Corporation
Board of Directors. In addition, National Capital may have given certain
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so that the ranges of
valuations resulting from and particular analysis described above should not be
taken to be National Capital's view of the actual value of NBC Financial
Corporation or the combined companies. The fact that any specific analysis has
been referred to in the summary above is not meant to indicate that such
analysis was given greater weight than any other analysis.
In performing its analyses, National Capital made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of NBC Financial
Corporation or Deposit Guaranty. The analyses performed by National Capital are
not necessarily indicative of actual values or actual future results, which may
be significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of National Capital's analysis of the
fairness of the consideration to be received by the NBC Financial Corporation
shareholders in the Holding Company Merger and were provided to the NBC
Financial Corporation Board of Directors in connection with the delivery of
National Capital's opinion. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at the present time or any time in the future.
National Capital used in its analyses various projections of future performance
prepared by the management of NBC Financial Corporation. The projections are
based on numerous variables and assumptions that are inherently unpredictable
and must be considered not certain of occurrence as projected. Accordingly,
actual results could vary significantly from those set forth in such
projections.
As described above, National Capital's opinion and presentation to the
NBC Financial Corporation Board of Directors were among the many factors taken
into consideration by the Board in making its determination to approve the
Merger Agreement.
According to the terms of the Engagement Letter, NBC Financial
Corporation has agreed to pay National Capital $90,000 for services rendered, a
portion of which is contingent upon completion of the Holding Company Merger.
NBC Financial Corporation has agreed to indemnify National Capital, its
affiliates, and their respective partners, directors, officers, agents,
consultants, employees and controlling persons against certain liabilities,
including liabilities under the federal securities laws. An affiliate of
National Capital, American Planning Corporation, has provided strategic
planning services to NBC Financial Corporation's subsidiary Bank. The revenues
received from the Bank by American Planning Corporation are not significant in
relation to total gross revenues. Neither National Capital nor American
Planning Corporation has performed any services for Deposit Guaranty and
neither has received any fees from Deposit Guaranty.
EFFECTIVE DATE
The Mergers will be consummated and become effective at the time a
certificate of merger (the "Certificate of Merger") is filed with the Secretary
of State of Louisiana, or as of such later date or time to which Deposit
Guaranty and NBC Financial Corporation agree, which may be specified in the
Certificate of Merger. Unless Deposit Guaranty and NBC Financial Corporation
otherwise agree, the Mergers will be consummated as soon as practicable
following receipt of NBC Financial Corporation shareholder
14
<PAGE> 25
and necessary regulatory approvals and satisfaction or waiver of the other
conditions to the Mergers. It is expected that the Effective Date will occur in
mid-1997; however, there can be no assurance that the conditions to the Mergers
will be satisfied or waived so that the Mergers can be consummated. See "The
Mergers -- Regulatory Approvals" and "The Mergers -- Other Conditions to the
Mergers."
REGULATORY APPROVALS
Consummation of the Mergers is conditioned on approval by all required
regulatory authorities, including approval by the OCC. OCC approval is
anticipated in May, 1997, although there can be no assurance that such approval
will be forthcoming or as to the conditions to or timing of such approval. The
Board of Governors of the Federal Reserve System, the Louisiana Office of
Financial Institutions and the Federal Deposit Insurance Corporation (the
"FDIC") must also review the Bank Merger and comment on the competitive factors
involved. The Bank Merger may not be consummated until the expiration of
fifteen (15) days after approval by the OCC has been obtained. During this
15-day period, the United States Department of Justice, if it objects to the
proposed Bank Merger for antitrust reasons, may file suit to enjoin the Bank
Merger.
OTHER CONDITIONS TO THE MERGERS
In addition to approval of the Merger Agreement by the requisite vote
of the holders of NBC Financial Corporation Common Stock and regulatory
approval of the Mergers, the respective obligations of each party under the
Merger Agreement are subject, among other conditions, to (i) the absence of any
order, decree or injunction of a court or agency of competent jurisdiction
enjoining or prohibiting consummation of the Mergers, (ii) receipt of an
opinion of Watkins Ludlam & Stennis, P.A. substantially to the effect that the
transactions contemplated by the Merger Agreement will be treated for federal
income tax purposes as a tax-free reorganization under Section 368 of the Code,
(iii) the condition that on the date of closing the representations and
warranties made in the Merger Agreement by each party are true and correct in
all material respects, (iv) the condition that prior to the Effective Date
there not have been a material adverse change in the financial condition,
results of operations or business of the other party's consolidated group and
(v) the receipt of customary legal opinions.
INTERESTS OF CERTAIN PERSONS IN THE MERGERS
INDEMNIFICATION. The Merger Agreement provides that Deposit Guaranty
shall indemnify the former directors, officers, employees and agents of NBC
Financial Corporation against all claims to which they become subject arising
out of actions or omissions occurring at or prior to the Effective Date of the
Mergers, including the transactions contemplated by the Merger Agreement, to
the full extent permitted by Louisiana law or by NBC Financial Corporation's
Articles of Incorporation and Bylaws. The Merger Agreement also provides that
DGNB Louisiana shall indemnify the former directors, officers, employees and
agents of the Bank against all claims to which they become subject arising out
of actions or omissions occurring at or prior to the Effective Date of the
Mergers, including the transactions contemplated by the Merger Agreement, to
the full extent permitted by Louisiana law or by the Bank's Articles of
Incorporation and Bylaws. Deposit Guaranty and DGNB Louisiana have agreed to
use their best efforts to maintain NBC Financial Corporation's and the Bank's
existing directors' and officers' liability insurance policies (or a policy
providing at least comparable coverage) for a period of five (5) years after
the Effective Date of the Mergers. The Merger Agreement also provides for
indemnification by Deposit Guaranty of NBC Financial Corporation and its
officers, directors and control persons from and against liability arising
under the Securities Act or otherwise if such liability arises out of or is
based on an untrue statement or omission of a material fact required to be
stated in the Registration Statement, of which this Proxy Statement/Prospectus
forms a part, or in any amendment or supplement thereto, or necessary to make
the statements made not misleading. This indemnification does not apply to
statements made in reliance on information furnished to Deposit Guaranty by or
on behalf of NBC Financial Corporation or the Bank for use in the Registration
Statement.
EMPLOYEE BENEFITS. The Merger Agreement provides that, after the
Effective Date of the Mergers, Deposit Guaranty will, subject to compliance
with applicable legal and regulatory requirements, provide coverage for all
employees of NBC Financial Corporation and the Bank under Deposit Guaranty's
benefit plans for which they are eligible, as soon as practicable after the
Effective Date. There will be no waiting period for coverage of eligible
participants under any health or group term life benefit plan, and no employee
will be denied benefits under any such plan for pre-existing conditions. All
prior years of service of Bank employees will be counted for vesting and
eligibility purposes under all applicable Deposit Guaranty employee benefit
plans to the extent permitted by applicable law. Any Bank employee who,
immediately prior to the Effective Date, is covered by or is a participant in a
Bank employee benefit plan, shall, on the Effective Date, be covered by or
participate in the comparable Deposit Guaranty employee benefit
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plan if a comparable plan otherwise is maintained by Deposit Guaranty and if
the eligibility requirements of the Deposit Guaranty plan are met.
EXCHANGE OF NBC FINANCIAL CORPORATION CERTIFICATES
On the Effective Date, each holder of NBC Financial Corporation Common
Stock will cease to have any rights as a shareholder of NBC Financial
Corporation and his or her sole rights will pertain to the shares of Deposit
Guaranty Common Stock to which such holder's shares of NBC Financial
Corporation Common Stock shall have been converted pursuant to the Mergers,
except for the right to receive cash for any fractional shares and except for
any such shareholder who exercises statutory dissenters' rights.
As soon as practicable after the Effective Date, the Exchange Agent
for the Deposit Guaranty Common Stock will mail to each holder of record of NBC
Financial Corporation Common Stock a letter of transmittal and instructions for
effecting the surrender of the stock certificates which, immediately prior to
the Effective Date, represented outstanding shares of NBC Financial Corporation
Common Stock in exchange for certificates representing shares of Deposit
Guaranty Common Stock. SHAREHOLDERS OF NBC FINANCIAL CORPORATION ARE REQUESTED
NOT TO SURRENDER THEIR NBC FINANCIAL CORPORATION CERTIFICATES FOR EXCHANGE
UNTIL SUCH LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. Upon surrender
of a certificate for exchange and cancellation to the Exchange Agent, together
with such letter of transmittal, duly executed, the holder of such certificate
shall be entitled to receive in exchange therefor: (i) a certificate
representing that number of whole shares of Deposit Guaranty Common Stock, as
defined below, to which such holder of NBC Financial Corporation Common Stock
shall have become entitled pursuant to the provisions hereof, and (ii) a check
representing the amount of cash in lieu of fractional shares, if any, which
such holder has the right to receive in respect of the certificates
surrendered, and such certificates shall forthwith be canceled.
Deposit Guaranty will not pay former shareholders of NBC Financial
Corporation who become holders of Deposit Guaranty Common Stock pursuant to the
Mergers any dividends or other distributions that may have become payable to
holders of record of Deposit Guaranty Common Stock following the Effective Date
until they have surrendered their certificates evidencing ownership of shares
of NBC Financial Corporation Common Stock along with a properly completed
letter of transmittal.
NBC Financial Corporation's shareholders who cannot locate their
certificates are urged to promptly contact Thomas A. Boone, President of NBC
Financial Corporation at 7777 Jefferson Highway, Baton Rouge, Louisiana 70809,
telephone number (504) 234-7777. A new certificate will be issued to replace
the lost certificate(s) only upon execution by the shareholder of an affidavit
certifying that his or her certificate(s) cannot be located and an agreement to
indemnify NBC Financial Corporation and Deposit Guaranty and their transfer
agents and registrars against any claim that may be made against NBC Financial
Corporation or Deposit Guaranty by the owner of the certificate(s) alleged to
have been lost or destroyed. NBC Financial Corporation or Deposit Guaranty may
also require the shareholder to post a bond in such sum as is sufficient to
support the shareholders' agreement to indemnify NBC Financial Corporation and
Deposit Guaranty.
AMENDMENT; WAIVER; TERMINATION
The Merger Agreement may be amended at any time before or after its
approval by the shareholders of NBC Financial Corporation by written agreement
of NBC Financial Corporation and Deposit Guaranty, except that no amendment may
be made after NBC Financial Corporation shareholder approval that changes the
consideration to be received by NBC Financial Corporation shareholders or that
by law would require further shareholder approval unless such further
shareholder approval is obtained.
The Merger Agreement provides that either party may (i) extend the
time for performance of any of the obligations or other acts of the other
parties, (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement or (iii) waive compliance with any of the agreements or
conditions contained in the Merger Agreement other than the satisfaction of all
requirements prescribed by law for consummation of the Mergers and receipt of
the tax opinion required by the Merger Agreement.
The Merger Agreement may be terminated at any time prior to the
Effective Date (i) by mutual written consent of the parties, properly
authorized by their respective Boards of Directors; (ii) by Deposit Guaranty
and DGNB Louisiana, if at the time of such termination there shall have been
any material adverse change in the financial condition, results of operations,
business or prospects of NBC Financial Corporation or the Bank since December
31, 1996; (iii) by NBC Financial Corporation and the Bank, if at the time of
such termination there shall have been any material adverse change in the
financial condition, results of operations, business or
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prospects of Deposit Guaranty since December 31, 1996; (iv) by any party to the
Merger Agreement, if a United States District Court shall rule upon application
of the Department of Justice after a full trial on the merits or a decision on
the merits based on a stipulation of facts that the Mergers violate the
antitrust laws of the United States; (v) by any party to the Merger Agreement,
if at the Meeting, the Merger Agreement shall not have been approved by the
required vote; (vi) by Deposit Guaranty and DGNB Louisiana, in the event there
are dissenting shareholders who hold more than ten percent (10%) of the shares
of NBC Financial Corporation Common Stock; or (vii) by any party to the Merger
Agreement if closing shall not have occurred by December 31, 1997.
CONDUCT OF BUSINESS PENDING THE MERGERS
The Merger Agreement provides that the Bank and NBC Financial
Corporation will conduct their businesses and engage in transactions only in
the ordinary course and consistent with prudent banking practice. Without the
prior consent of Deposit Guaranty, neither the Bank nor NBC Financial
Corporation shall (i) increase by more than ten percent (10%) the compensation
payable by the Bank or NBC Financial Corporation to any of its directors,
officers, agents, consultants, or any of its employees whose total compensation
after such increase would be in excess of $25,000 per annum, grant or pay any
extraordinary bonus, percentage compensation, service award or other like
benefit to any such director, officer, agent, consultant or employee, or make
or agree to any extraordinary welfare, pension, retirement or similar payment
or arrangement for the benefit of any such director, officer, agent, consultant
or employee, (ii) sell or dispose of material assets except in the ordinary
course of business, (iii) enter into any new capital commitments or make any
capital expenditures, except commitments or expenditures within existing
operating and capital budgets or otherwise in the ordinary course of business
or (iv) authorize or issue any additional shares of any class of its capital
stock or any securities exchangeable for or convertible into any such shares or
any options or rights to acquire any such shares, or otherwise authorize or
affect any change in its capitalization. In addition, no dividends shall be
paid by NBC Financial Corporation, without the consent of Deposit Guaranty.
Deposit Guaranty has consented to the payment of a first quarter dividend of
$.04 per share.
In addition, NBC Financial Corporation has agreed that, without the
prior approval of Deposit Guaranty, it will not solicit or encourage inquiries
or proposals with respect to, or, furnish any information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or of a substantial
equity interest in, NBC Financial Corporation or any subsidiary thereof, or any
business combination with NBC Financial Corporation or any subsidiary thereof,
and shall instruct its officers, directors, agents and affiliates to refrain
from doing any of the above; provided, however, that this restriction shall not
prohibit the NBC Financial Corporation Board of Directors from furnishing
information to or entering into discussions or negotiations with any person or
entity that makes an unsolicited proposal to acquire NBC Financial Corporation
pursuant to a merger, consolidation, share exchange, purchase of a substantial
portion of the assets, business combination or other similar transaction, if
the NBC Financial Corporation Board of Directors determines in good faith that
such action is required for the Board of Directors to comply with its fiduciary
duties to shareholders. If NBC Financial Corporation furnishes information to
or enters into discussions or negotiations with another party prior to December
31, 1997, and enters into a definitive agreement with such party prior to June
30, 1998, then NBC Financial Corporation shall pay Deposit Guaranty a fee of
$100,000, unless the Merger Agreement is terminated by Deposit Guaranty or DGNB
Louisiana based on material adverse change in the financial condition, results
of operations, business or prospects of NBC Financial Corporation or the Bank
prior to NBC Financial Corporation entering into a definitive agreement with
such party.
RESALES OF DEPOSIT GUARANTY COMMON STOCK
The shares of Deposit Guaranty Common Stock to be issued to the
holders of NBC Financial Corporation Common Stock pursuant to the Merger
Agreement have been registered under the Securities Act pursuant to a
Registration Statement on Form S-4, of which this Proxy Statement/Prospectus is
a part, thereby allowing such shares to be freely transferred without
restriction by persons who will not be "affiliates" of Deposit Guaranty or who
were not "affiliates" of NBC Financial Corporation within the meaning of Rule
145 under the Securities Act. In general, affiliates of NBC Financial
Corporation include its executive officers and directors and any person who
controls, is controlled by or is under common control with NBC Financial
Corporation. Holders of NBC Financial Corporation Common Stock who are
affiliates of NBC Financial Corporation will not be able to resell the Deposit
Guaranty Common Stock received by them in the Mergers unless the Deposit
Guaranty Common Stock is registered for resale under the Securities Act, is
sold in compliance with Rule 145 under the Securities Act or is sold in
compliance with another exemption from the registration requirements of the
Securities Act.
Pursuant to Rule 145 under the Securities Act, the sale of Deposit
Guaranty Common Stock held by former affiliates of NBC Financial Corporation
will be subject to certain restrictions. Such persons may sell Deposit Guaranty
Common Stock under Rule 145
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only if (i) Deposit Guaranty has filed all reports required to be filed by it
under Section 13 or 15(d) of the Exchange Act during the preceding twelve
months, (ii) such Deposit Guaranty Common Stock is sold in a "broker's
transaction," which is defined in Rule 144 under the Securities Act as a sale
in which (a) the seller does not solicit or arrange for orders to buy the
securities, (b) the seller does not make any payment other than to the broker,
(c) the broker does no more than execute the order and receive a normal
commission and (d) the broker does not solicit customer orders to buy the
securities and (iii) such sale and all other sales made by such person within
the preceding three months do not exceed the greater of (x) one percent (1%) of
the outstanding shares of Deposit Guaranty Common Stock or (y) the average
weekly trading volume of Deposit Guaranty Common Stock on the New York Stock
Exchange during the four-week period preceding the sale. Any affiliate of NBC
Financial Corporation who is not an affiliate of Deposit Guaranty after the
Mergers may sell Deposit Guaranty Common Stock without restriction following
the second anniversary of the Effective Date.
NBC Financial Corporation has agreed to use its best efforts to cause
each of its directors and executive officers and each person who is a
beneficial owner of five percent (5%) or more of the outstanding NBC Financial
Corporation Common Stock (each of whom may be deemed to be an affiliate under
the Securities Act) to enter into an agreement not to sell shares of Deposit
Guaranty Common Stock received by him or her in violation of the Securities Act
or the rules and regulations of the Commission thereunder.
EXPENSES AND FEES
All legal and other costs and expenses incurred in connection with the
Mergers and the transactions contemplated thereby will be paid by the party
incurring such costs and expenses, regardless of whether the Mergers are
consummated.
ACCOUNTING TREATMENT
The Mergers, if consummated as proposed, will be treated as a purchase
for accounting and financial reporting purposes. The purchase method accounts
for a business combination as the acquisition of one enterprise by another, the
value of the company's shares issued in the transaction is included in
stockholders' equity and any of such amount in excess of net fair values of
tangible and identifiable intangible assets of the acquired company is treated
as an intangible asset on the acquiring company's financial statements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion of the principal federal income tax
consequences of the Mergers is based on provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), the regulations thereunder, judicial
authority, and administrative rulings and practice as of the date hereof, any
of which is subject to change. Consummation of the Mergers is conditioned on
the receipt by Deposit Guaranty, DGNB Louisiana, NBC Financial Corporation and
the Bank of an opinion of counsel to Deposit Guaranty to the effect that the
Mergers will be treated, for federal income tax purposes, as tax-free
reorganizations under Section 368(a) of the Code.
Any NBC Financial Corporation shareholder who, pursuant to the
Mergers, exchanges all of the NBC Financial Corporation Common Stock that such
holder owns solely for Deposit Guaranty Common Stock will not recognize any
gain or loss upon such exchange. The aggregate tax basis of Deposit Guaranty
Common Stock received by such a holder in exchange for NBC Financial
Corporation Common Stock will equal such holder's tax basis in the NBC
Financial Corporation Common Stock surrendered. If such shares of NBC Financial
Corporation Common Stock are held as capital assets at the Effective Date, the
holding period of the Deposit Guaranty Common Stock received will include the
holding period of the NBC Financial Corporation Common Stock surrendered
therefor. NBC Financial Corporation's shareholders should consult their tax
advisors as to the determination of their tax basis and holding period in any
one share of Deposit Guaranty Common Stock, as several methods of determination
may be available.
To avoid the expense and inconvenience to Deposit Guaranty of issuing
fractional shares, no fractional shares of Deposit Guaranty Common Stock will
be issued pursuant to the Mergers. Any NBC Financial Corporation shareholder
who receives cash pursuant to the Mergers in lieu of a fractional share
interest will be treated as having received such fractional share pursuant to
the Mergers, and then as having exchanged such fractional share for cash in a
redemption by Deposit Guaranty, subject to the provisions and limitations of
Section 302 of the Code. If the Deposit Guaranty Common Stock represents a
capital asset in the hands of the shareholder, then the shareholder will
generally recognize capital gain or loss on such a deemed redemption of the
fractional share in an amount determined by the difference between the amount
of cash received for such fractional share and the shareholder's tax basis in
the fractional share.
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NBC Financial Corporation's shareholders who perfect dissenters'
rights and receive cash in exchange for their NBC Financial Corporation Common
Stock will be treated, under Code Sections 302(a) and 302(b)(3), as receiving
such payment in complete redemption of the NBC Financial Corporation Common
Stock subject to the proceeding, provided that such shareholder does not
actually or constructively own (under Code Section 318) any NBC Financial
Corporation Common Stock after the redemption. Such deemed redemption may also
be subject to Section 302(a) of the Code if such deemed redemption is
"substantially disproportionate" with respect to the NBC Financial Corporation
shareholder who exercises dissenters' rights, or is "not essentially equivalent
to a dividend," with the result that a shareholder who exercises dissenters'
rights will recognize gain or loss equal to the difference between the amount
realized and such shareholder's tax basis in the NBC Financial Corporation
Common Stock subject to the proceeding. Any such gain or loss recognized on
such redemption will be treated as capital gain or loss if the NBC Financial
Corporation Common Stock with respect to which dissenters' rights were
exercised were held as capital assets. Each NBC Financial Corporation
shareholder who contemplates exercising dissenters' rights should consult a tax
advisor as to the possibility that all or a portion of the payment received
pursuant to the dissenters' rights proceeding will be treated as dividend
income.
Unless an exemption applies under the applicable law and regulations,
the Exchange Agent will be required to withhold thirty-one percent (31%) of any
cash payments to which a shareholder or other payee is entitled pursuant to the
Mergers unless the shareholder or other payee provides its taxpayer
identification number (social security number or employer identification
number) and certifies that such number is correct. Each shareholder and, if
applicable, each other payee should complete and sign the substitute Form W-9
included as part of the letter of transmittal so as to provide the information
and certification necessary to avoid backup withholding, unless an applicable
exemption exists and is established in a manner satisfactory to Deposit
Guaranty and the Exchange Agent.
THE FOREGOING CONSTITUTES ONLY A GENERAL DESCRIPTION OF CERTAIN
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGERS WITHOUT REGARD TO THE PARTICULAR
FACTS AND CIRCUMSTANCES OF EACH NBC FINANCIAL CORPORATION SHAREHOLDER. NBC
FINANCIAL CORPORATION'S SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGERS, INCLUDING
THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
LAWS.
DISSENTERS' RIGHTS
Under Section 131 of the Louisiana BCL (a copy of which is attached
hereto as Exhibit C), any holder of record of shares of NBC Financial
Corporation Common Stock who files a written objection to the Mergers prior to
or at the Meeting at which the vote on the Mergers is taken, and who votes
against the Mergers, may demand in writing that such shareholder be paid in
cash the fair cash value of such shares, as of the day before the Meeting, as
determined by agreement between the shareholder and Deposit Guaranty or by a
state district court in East Baton Rouge Parish, Louisiana, if the shareholder
and Deposit Guaranty are unable to agree upon the fair cash value ("Dissenters'
Rights"). INTERESTED PARTIES SHOULD NOTE THAT, IF THE MERGER AGREEMENT IS
APPROVED BY EIGHTY PERCENT (80%) OR MORE OF THE OUTSTANDING SHARES OF NBC
FINANCIAL CORPORATION COMMON STOCK, SECTION 131 OF THE LOUISIANA BCL PROVIDES
THAT NO NBC FINANCIAL CORPORATION SHAREHOLDER WILL HAVE DISSENTERS' RIGHTS. A
person who is a beneficial owner, but not a registered owner, of shares of NBC
Financial Corporation Common Stock who wishes to exercise the rights of a
dissenting shareholder under the Louisiana BCL cannot do so in his own name and
should have the record ownership of the shares transferred to his or her name
or instruct the record owner thereof to take all required action to comply on
his behalf with the procedures under Section 131 of the Louisiana BCL.
Any shareholder of record contemplating exercising Dissenters' Rights
is urged to review carefully the provisions of Section 131 of the Louisiana
BCL, particularly the procedural steps required to perfect Dissenters' Rights
thereunder. DISSENTERS' RIGHTS WILL BE LOST IF THE PROCEDURAL REQUIREMENTS OF
SECTION 131 ARE NOT FULLY SATISFIED.
Set forth below is a summary of the procedures relating to the
exercise of Dissenters' Rights. The following summary does not purport to be a
complete statement of the provisions of Section 131 of the Louisiana BCL and is
qualified in its entirety by reference to Exhibit C hereto and to any
amendments to such sections as may be adopted after the date of this Proxy
Statement/Prospectus.
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FILING WRITTEN OBJECTION AND VOTE AGAINST THE MERGERS
To exercise the right of dissent, a shareholder (each a "Dissenter")
must (i) deliver to NBC Financial Corporation a written objection to the Merger
Agreement prior to or at the Meeting AND ALSO (ii) vote the shares of NBC
Financial Corporation Common Stock held by him (in person or by proxy) against
the Merger Agreement at the Meeting. Neither a vote against the Merger
Agreement nor a specification in a proxy to vote against the Merger Agreement
will in and of itself constitute the necessary written objection to the Merger
Agreement. Moreover, by voting in favor of, or abstaining from voting on, the
Merger Agreement, or by returning the enclosed proxy without instructing the
proxy holders to vote against the Merger Agreement, a shareholder waives his or
her rights under Section 131 of the Louisiana BCL.
NOTICE OF THE EFFECTIVE DATE
If the Merger Agreement is approved by less than eighty percent (80%)
of the outstanding shares of NBC Financial Corporation Common Stock, then,
promptly after the Effective Date, notice will be given to each Dissenter that
the Mergers have become effective. The notice shall be sent by registered mail,
addressed to the Dissenter at such Dissenter's last address on NBC Financial
Corporation's records immediately prior to the Effective Date.
WRITTEN DEMAND
Within twenty (20) days after the mailing of such notice, a Dissenter
must file with Deposit Guaranty a demand in writing (the "Demand") for payment
of the fair cash value of such Dissenter's shares as of the day prior to the
Meeting, stating the amount demanded and a post office address to which Deposit
Guaranty may reply. Simultaneously with the filing of the Demand, the Dissenter
shall also deposit the certificate(s) representing his shares of NBC Financial
Corporation Common Stock (duly endorsed and transferred to Deposit Guaranty
upon the sole condition that the certificate(s) will be delivered to Deposit
Guaranty upon payment of the value of the shares in accordance with Section 131
of the Louisiana BCL) in escrow with a chartered bank or trust company located
in East Baton Rouge Parish, Louisiana (the "Escrow Bank"). Along with the
Demand, the Dissenter shall deliver to Deposit Guaranty a written
acknowledgment of the Escrow Bank that it holds such certificate(s), endorsed
as specified above.
A Dissenter who fails to satisfy any of the foregoing conditions
within the proper time periods will conclusively be presumed to have acquiesced
to the Mergers and will forfeit any right to seek payment pursuant to Section
131 of the Louisiana BCL.
APPRAISAL
If Deposit Guaranty does not agree to the amount demanded by the
Dissenter, or does not agree that any payment is due, it will, within twenty
(20) days after receipt of such Demand and acknowledgment, notify such
Dissenter in writing of either (i) the value it will agree to pay, or (ii) its
belief that no payment is due. If the Dissenter does not agree to accept the
offered amount, or disagrees with Deposit Guaranty's assertion that no payment
is due, he must within sixty (60) days after the receipt of such notice file
suit against Deposit Guaranty in state court in East Baton Rouge Parish,
Louisiana for a judicial determination of the fair cash value of his shares.
Any Dissenter who is entitled to file such suit may, within such sixty-day
period but not thereafter, intervene as a plaintiff in any suit filed against
Deposit Guaranty by another former shareholder of NBC Financial Corporation for
a judicial determination of the fair cash value of such other shareholder's
shares. If a Dissenter fails to bring or to intervene in such a suit within the
applicable sixty-day period, the Dissenter will be deemed to have consented to
accept either Deposit Guaranty's statement that no payment is due or, if
Deposit Guaranty does not contend that no payment is due, to accept the value
of his shares specified by Deposit Guaranty in its notice of disagreement (the
"Notice of Disagreement").
Shareholders considering exercising Dissenters' Rights should bear in
mind that the fair cash value of their shares determined under Section 131 of
the Louisiana BCL could be more than, the same as or less than the
consideration they would otherwise receive pursuant to the Merger Agreement if
they do not seek such rights, and that opinions of financial advisors as to
fairness are not opinions as to fair cash value under Section 131 of the
Louisiana BCL.
Any Dissenter who has duly filed a Demand in compliance with Section
131 of the Louisiana BCL will, after filing the Demand, cease to have any of
the rights of a shareholder, except those rights generally provided to
Dissenters under Section 131 of the Louisiana BCL.
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A Dissenter has the right to voluntarily withdraw his or her Demand
and to accept the terms offered in the Merger Agreement at any time before
Deposit Guaranty gives its Notice of Disagreement, but thereafter the Dissenter
may withdraw his or her Demand only with the consent of Deposit Guaranty. If a
Demand is properly withdrawn, or the Dissenter otherwise loses his Dissenters'
Rights, a Dissenter shall only be entitled to receive the consideration offered
pursuant to the Merger Agreement.
PAYMENT AND COSTS
If upon the filing of a suit or intervention against Deposit Guaranty
by a Dissenter pursuant to Section 131 of the Louisiana BCL, Deposit Guaranty
deposits with the court the amount, if any, which it specified in its Notice of
Disagreement, and if in that notice Deposit Guaranty offered to pay such amount
to the Dissenter on demand, then the costs (not including legal fees) of the
suit or intervention will be taxed against the Dissenter if the amount finally
awarded to the Dissenter, exclusive of interest and costs, is equal to or less
than the amount so deposited; otherwise, the costs (not including legal fees)
will be assessed against Deposit Guaranty.
NOTICES
Prior to the Effective Date, dissenting shareholders of NBC Financial
Corporation should send any communications regarding their rights to Thomas A.
Boone, President, NBC Financial Corporation, 7777 Jefferson Highway, Baton
Rouge, Louisiana 70809. On or after the Effective Date, dissenting shareholders
should send any communications regarding their rights to J. Clifford Harrison,
Secretary, Deposit Guaranty Corp. All such communications should be signed by
or on behalf of the dissenting shareholder in the form in which his or her
shares are registered on the books of NBC Financial Corporation. Deposit
Guaranty and DGNB Louisiana have the right to terminate the Merger Agreement if
the number of shares of NBC Financial Corporation Common Stock as to which
holders thereof are legally entitled to assert Dissenters' Rights exceeds ten
percent (10%) of the outstanding shares of NBC Financial Corporation Common
Stock. See "The Mergers -- Amendment; Waiver; Termination."
ANY NBC FINANCIAL CORPORATION SHAREHOLDER WHO DESIRES TO EXERCISE
DISSENTERS' RIGHTS SHOULD CAREFULLY REVIEW THE LOUISIANA BCL AND IS URGED TO
CONSULT SUCH SHAREHOLDER'S LEGAL ADVISOR BEFORE EXERCISING OR ATTEMPTING TO
EXERCISE SUCH RIGHTS.
COMPARATIVE RIGHTS OF SHAREHOLDERS
NBC Financial Corporation is incorporated in the State of Louisiana
and Deposit Guaranty is incorporated in the State of Mississippi. If the
Mergers are consummated, holders of NBC Financial Corporation Common Stock,
whose rights as shareholders are currently governed by Louisiana law and by NBC
Financial Corporation's Articles of Incorporation (the "NBC Financial
Corporation Articles") and Bylaws, will, upon consummation of the Mergers,
become shareholders of Deposit Guaranty and their rights as such will be
governed by Mississippi law and by Deposit Guaranty's Articles of Incorporation
(the "Deposit Guaranty Articles") and Bylaws.
Certain significant differences between the rights of holders of NBC
Financial Corporation Common Stock and holders of Deposit Guaranty Common Stock
are set forth below. This summary is not intended to be relied upon as an
exhaustive list or a detailed description of the provisions discussed and is
qualified in its entirety by the Louisiana BCL and the Mississippi Business
Corporation Act (the "Mississippi BCA") and by the Articles of Incorporation
and Bylaws of each of NBC Financial Corporation and Deposit Guaranty,
respectively, to which holders of NBC Financial Corporation Common Stock are
referred.
CUMULATIVE VOTING RIGHTS
NBC FINANCIAL CORPORATION. Each outstanding share of NBC Financial
Corporation Common Stock is entitled to one vote on each matter submitted to a
vote of shareholders. The NBC Financial Corporation Articles do not provide for
cumulative voting in the election of directors.
DEPOSIT GUARANTY. Pursuant to the Mississippi BCA and Deposit
Guaranty's Bylaws, each outstanding share of Deposit Guaranty stock is entitled
to one (1) vote on each matter submitted to a vote. However, in connection with
the election of directors, holders of Deposit Guaranty Common Stock have
cumulative voting rights. Pursuant to the Deposit Guaranty Bylaws, every
shareholder entitled to vote in the election of directors shall have the right
to vote, in person or by proxy, the number of shares owned
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by him for as many persons as there are directors to be elected, or to cumulate
his votes by giving one (1) candidate the number of votes equal to the number
of directors to be elected multiplied by the number of his shares, or by
distributing such votes on the same principle among any number of candidates.
LIMITATIONS ON DIRECTORS' AND OFFICERS' LIABILITY
NBC FINANCIAL CORPORATION. The NBC Financial Corporation Articles
provide that no director or executive officer of NBC Financial Corporation may
be held personally liable to NBC Financial Corporation or its shareholders for
monetary damages for breach of his or her fiduciary duty as a director or
executive officer, except for liability for: (i) breach of the director's or
officer's duty of loyalty to NBC Financial Corporation or its shareholders,
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) unlawful dividends or certain
other unlawful distributions and (iv) any transaction from which the director
or executive officer derived an improper personal benefit.
DEPOSIT GUARANTY. Deposit Guaranty's Articles and Bylaws do not
contain any provision limiting the personal liability of Deposit Guaranty's
directors and officers for monetary damages resulting from breach of fiduciary
duty.
SUPERMAJORITY VOTING REQUIREMENTS; BUSINESS COMBINATIONS
NBC FINANCIAL CORPORATION. The Louisiana BCL states that mergers,
consolidations and sales of all or substantially all of the assets of a
Louisiana corporation must be approved by the shareholders by vote of at least
two- thirds of the voting power present, or such larger or smaller vote (not
less than a majority) of the voting power present or the total voting power as
the corporation's articles may require. Under the Louisiana BCL, share
exchanges require a similar shareholder vote by each class or series included
in the exchange. The NBC Financial Corporation Articles do not provide for
approval by vote of less than two-thirds of the voting power present.
The NBC Financial Corporation Articles specify that no Business
Combination (as defined below) involving NBC Financial Corporation or a
subsidiary thereof and a Major Stockholder (as defined below), or any affiliate
or associate of a Major Stockholder shall be valid unless the Business
Combination (i) was approved by the NBC Financial Corporation Board prior to
the Major Stockholder involved in the Business Combination becoming a Major
Stockholder; or (ii) the Major Stockholder involved in the Business Combination
sought and obtained the unanimous prior approval of the Board of Directors to
become a Major Stockholder and the Business Combination was approved by a
majority of the Continuing Directors (as defined below); or (iii) the Business
Combination was approved by at least eighty percent (80%) of the Continuing
Directors of NBC Financial Corporation; or (iv) the Business Combination was
approved by at least eighty percent (80%) of the outstanding Voting Stock of
NBC Financial Corporation and by at least eighty percent (80%) of the
outstanding Voting Stock beneficially owned by stockholders other than any
Major Stockholder.
A "Major Stockholder" is defined to include any person (other than any
subsidiary of NBC Financial Corporation) which, together with its affiliates
and associates and any person acting in concert therewith, is the beneficial
owner of ten percent (10%) or more of the shares held by the holders of the
Voting Stock of NBC Financial Corporation. A "Business Combination" is (a) any
merger or consolidation (whether in a single transaction or series of related
transactions) of NBC Financial Corporation or any subsidiary thereof with any
Major Stockholder; (b) any sale, lease, exchange, transfer, distribution to
stockholders or other disposition, including without limitation, a mortgage,
pledge or other security device, to or with a Major Stockholder by NBC
Financial Corporation or any subsidiary thereof of all, substantially all or a
substantial part of the assets of NBC Financial Corporation or any subsidiary
thereof; (c) the purchase, exchange, lease or other acquisition by NBC
Financial Corporation or any subsidiary thereof of all or substantially all or
any substantial part of the assets or business of a Major Stockholder; (d) the
issuance of any securities, or of any rights, warrants or options to acquire
any securities of NBC Financial Corporation or any subsidiary thereof to a
Major Stockholder or the acquisition by NBC Financial Corporation or any
subsidiary thereof of any securities, rights, warrants or options to acquire
any securities of a Major Stockholder; and (e) any reclassification of
securities, recapitalization or other transaction which has the effect,
directly or indirectly of increasing the proportionate amount of Voting Stock
of NBC Financial Corporation or any subsidiary thereof which is beneficially
owned by a Major Stockholder. A "Continuing Director" means: (i) a person who
was a member of the NBC Financial Corporation Board of Directors immediately
prior to the time that any then existing Major Stockholder became a Major
Stockholder or (ii) a person designated (before initially becoming a director)
as a Continuing Director by a majority of the then Continuing Directors.
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DEPOSIT GUARANTY. The Mississippi BCA states that in the absence of a
greater requirement in the articles of incorporation, a sale, lease, exchange,
or other disposition of all, or substantially all, a corporation's property
requires approval by a majority of the shares entitled to vote on the
transaction. The Deposit Guaranty Articles do not provide for a greater than
majority vote on such a transaction.
The Deposit Guaranty Articles require that any Business Combination
(as defined below) involving Deposit Guaranty or a subsidiary of Deposit
Guaranty and an Interested Shareholder (as defined below), or any affiliate or
associate of an Interested Shareholder or any person that following such
transaction would be an affiliate or associate of an Interested Shareholder be
approved by the affirmative vote of at least eighty percent (80%) of the votes
entitled to be cast by the holders of all the then outstanding shares of voting
stock of Deposit Guaranty, excluding shares held by the Interested Shareholder,
unless the transaction is approved by a majority of the Continuing Directors
(as defined below) or unless certain fair price and procedural requirements are
satisfied.
An "Interested Shareholder" is defined to include any person (other
than Deposit Guaranty, certain Deposit Guaranty subsidiaries, employee benefit
plans of Deposit Guaranty and the trustees of such plans) who (a) is or has
announced a plan to become the beneficial owner of ten percent (10%) or more of
the voting stock of Deposit Guaranty, or (b) is an affiliate or associate of
Deposit Guaranty who has, within the past two (2) years, been the beneficial
owner of ten percent (10%) or more of Deposit Guaranty's voting stock. A person
is the "beneficial owner" of voting stock which such person, directly or
indirectly, owns or has the right to acquire or vote.
A "Business Combination" includes the following: (a) a merger or
consolidation of Deposit Guaranty or any subsidiary with an Interested
Shareholder; (b) any sale, disposition or other arrangement (including
investments, loans, advances, guarantees, extensions of credit, creation of
security interests and joint ventures) with or for the benefit of an Interested
Shareholder involving assets or securities having a fair market value (or
involving aggregate commitments) of $10,000,000 or more or constituting more
than five percent (5%) of the book value of the total assets (in the case of
transactions involving assets or commitments other than capital stock) or five
percent (5%) of the shareholders' equity (in the case of transactions in
capital stock) of the entity in question, as reflected in the most recent
fiscal year-end consolidated balance sheet of such entity existing at the time
the shareholders of Deposit Guaranty would be required to approve or authorize
such transaction; (c) the adoption of any plan or proposal for the liquidation
or dissolution of Deposit Guaranty for any amendment to Deposit Guaranty's
Bylaws; or (d) any reclassification of securities, recapitalization, merger
with a subsidiary or other transaction which has the effect, directly or
indirectly, or increasing an Interested Shareholder's proportionate share of
the outstanding capital stock of Deposit Guaranty or a subsidiary.
A "Continuing Director" means: (a) any member of the Deposit Guaranty
Board of Directors who is not affiliated with an Interested Shareholder and who
either (i) was a Deposit Guaranty director prior to the time the Interested
Shareholder became an Interested Shareholder, or (ii) was a Deposit Guaranty
director on April 30, 1986 and has been a Deposit Guaranty director
continuously since; and (b) any successor of a Continuing Director who is not
affiliated with an Interested Shareholder and who was recommended or elected to
succeed the Continuing Director by a majority of the Continuing Directors.
REMOVAL OF DIRECTORS
NBC FINANCIAL CORPORATION. The NBC Financial Corporation Bylaws
provide that any director may be removed from office at any time, with or
without cause, only by the affirmative vote of the holders of no less than
eighty percent (80%) of the total voting power of all shares of NBC Financial
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
DEPOSIT GUARANTY. Deposit Guaranty's Articles provide that Deposit
Guaranty shareholders may remove a director with or without cause, but only at
a meeting expressly called for that purpose and upon the affirmative vote of
the holders of at least eighty percent (80%) of the voting power of all shares
of stock entitled to vote generally in the election of directors, and in the
event that less than the entire Board is to be removed, not one of the
directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the class
of directors of which he is a part.
BOARD OF DIRECTORS
NBC FINANCIAL CORPORATION. The Board of Directors of NBC Financial
Corporation is divided into three (3) classes - Classes I, II and III. Classes
I and II each consist of three (3) directors, and Class III consists of two (2)
directors. The term of the Class I directors will expire at the 1999 Annual
Meeting, the term of the Class II directors will expire at the 1998 Annual
Meeting,
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and the term of the Class III directors will expire at the 1997 Annual Meeting.
The number of directors shall be fixed from time to time by resolution of not
less than sixty-six and two-thirds percent (66 2/3%) of the directors or by
affirmative vote of the holders of not less than eighty percent (80%) of the
total voting power of all shares of NBC Financial Corporation entitled to vote
generally in the election of directors, voting together as a single class.
DEPOSIT GUARANTY. The Board of Directors of the Company is divided
into three (3) classes - Class A, Class B, and Class C. Class A and Class C
each consists of four (4) directors. Class B consists of three (3) directors.
The term of the Class A directors will expire at the 1999 Annual Meeting, the
term of the Class B directors will expire at the 1997 Annual Meeting, and the
term of the Class C directors will expire at the 1998 Annual Meeting.
VACANCIES IN THE BOARD OF DIRECTORS
NBC FINANCIAL CORPORATION. Newly created directorships in the NBC
Financial Corporation Board of Directors resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause shall be filled exclusively by a vote of no less than
sixty-six and two-thirds percent (66 2/3%) of the remaining directors, even
though the remaining directors may not constitute a quorum, at any regular or
special board of directors meeting. Any director so elected, shall hold office
for the remainder of the full term of the class of directors in which the new
directorship was created and the vacancy occurred and until such director's
successor is elected and qualified.
DEPOSIT GUARANTY. Under Deposit Guaranty's Bylaws, any vacancy,
including one occurring as a result of an increase in the number of directors,
may be filled only by the shareholders.
AMENDMENT OF THE ARTICLES OF INCORPORATION OR BYLAWS
NBC FINANCIAL CORPORATION. Except for certain specifically identified
Articles which require the affirmative vote of not less than eighty percent
(80%) of the shareholders for amendment, the NBC Financial Corporation Articles
may be amended by a vote of not less than sixty-six and two-thirds percent (66
2/3%) of the shares of NBC Financial Corporation Common Stock present or
represented at a shareholders meeting. The affirmative vote of at least eighty
percent (80%) of the shareholders is required to amend Article 17 related to
Business Combinations (together with eighty percent (80%) of the shares owned
by shareholders other than any Major Stockholder) and to amend Articles 9, 10
and 11 relating to shareholder action without a meeting, special meetings of
the shareholders, and amendment of certain provisions of the Bylaws,
respectively. The NBC Financial Corporation Bylaws may be made, altered,
amended, changed, waived or repealed, and new Bylaws may be adopted, by the
Board of Directors at any regular or special meeting by the affirmative vote of
a majority of those directors present at any meeting of the directors; subject,
however, to the right of the shareholders to alter, amend, change, waive or
repeal any Bylaws made or amended by the directors on affirmative vote of not
less than a majority of the shareholders, and subject, further, to the
requirement for vote by eighty percent (80%) of the shareholders to amend
certain provisions of the Bylaws.
DEPOSIT GUARANTY. Under the Mississippi BCA, the board of directors
has the power to amend or repeal the bylaws of a Mississippi corporation such
as Deposit Guaranty, unless such power is expressly reserved for the
shareholders. Deposit Guaranty's Articles provide that an amendment to the
Bylaws relating to composition of the Board of Directors and removal of
directors must be approved by the affirmative vote of at least eighty percent
(80%) of the shareholders (the same proportion required in order to effect the
removal of a director), excluding (except for purposes of determining whether a
quorum is present) those shares beneficially owned by any Interested
Shareholder. The affirmative vote of at least eighty percent (80%) of the
shareholders is also required to amend the provisions of the Articles of
Incorporation requiring a supermajority approval of Business Combinations.
Amendments to the Articles of Incorporation that result in Dissenters' Rights
require the affirmative vote of a majority of the outstanding shares entitled
to vote on the amendment. Otherwise, the Articles of Incorporation may be
amended by a majority vote of the shares present at a meeting where a quorum is
present.
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SPECIAL MEETINGS OF SHAREHOLDERS
NBC FINANCIAL CORPORATION. Under the NBC Financial Corporation Bylaws,
special meetings of the shareholders may be called for any purpose at any time
by the Chairman of the Board or the Chief Executive Officer of the corporation,
or by resolution of the Board of Directors duly adopted by vote of not less
than sixty-six and two-thirds percent (66 2/3%) of the entire Board of
Directors. In addition, pursuant to the NBC Financial Corporation Articles,
shareholders may call a special meeting upon written request signed by holders
of not less than sixty-six and two-thirds percent (66 2/3%) of the total voting
power of the corporation.
DEPOSIT GUARANTY. Under Deposit Guaranty's Bylaws, special meetings of
the shareholders, for any purpose or purposes, may be called by the Chairman of
the Board, the President or the Board of Directors, or upon the written request
of shareholders holding in the aggregate not less than ten percent (10%) of the
total voting power entitled to vote on an issue.
SHAREHOLDER PROPOSALS AND NOMINATIONS
NBC FINANCIAL CORPORATION. Under the NBC Financial Corporation Bylaws,
proposals by shareholders for consideration in an annual or special meeting can
be considered at such meeting if delivered to the corporation in proper form at
least sixty (60) days prior to the annual or special meeting at which the
proposal is to be considered (or if fewer than seventy (70) days notice or
prior public disclosure of the meeting date is given or made to the
shareholders, then not later than the tenth (10th) day following the day on
which the notice of the date of the meeting was mailed or such public
disclosure was made). The shareholder must provide his or her name and address,
a brief description of the proposal, the reasons for submitting the proposal,
the number of shares beneficially owned by the shareholder, any material
interest of the shareholder in the proposal, and representations that the
shareholder will attend the meeting to move consideration of the proposal and
that the shareholder will remain a shareholder of record through the record
date of the meeting. Shareholders may submit nominations for director only if
(a) written notice with certain information regarding the shareholder
submitting the nomination and the nominee(s) is delivered to the corporation at
least sixty (60) days in advance of the annual meeting at which the nomination
is to be considered (or if fewer than seventy (70) days notice or prior public
disclosure of the meeting date is given or made to the shareholders, then not
later than the tenth (10th) day following the day on which the notice of the
date of the meeting was mailed or such public disclosure was made) along with
such notice.
DEPOSIT GUARANTY. Deposit Guaranty's Bylaws provide procedures that
must be followed to properly bring a proposal before a shareholders meeting or
to nominate candidates for election as directors. At least sixty (60) days
prior notice to the Secretary of Deposit Guaranty is required if a shareholder
intends to nominate an individual for election to the Board of Directors or
propose any shareholder action. These Bylaw provisions also require information
to be supplied about both the shareholder making such nomination or proposal
and the person nominated.
AUTHORIZED CAPITAL
NBC FINANCIAL CORPORATION. The authorized capital stock of NBC
Financial Corporation consists of 10,000,000 shares of NBC Financial
Corporation $1.00 par value Common Stock and 1,000,000 shares of NBC Financial
Corporation Preferred Stock.
DEPOSIT GUARANTY. Deposit Guaranty has 100,000,000 shares of
authorized common stock having no par value, 25,000,000 Class A Voting
Preferred Stock having no par value and 25,000,000 Class B Non-Voting Preferred
having no par value. Holders of Preferred Stock shall be entitled to receive
dividends subject to statutory restrictions, when and as declared by the Board
of Directors, and at such periods as shall be fixed by the Board of Directors.
The Board of Directors has the power to establish the number of shares of each
series, redemption rights, dividend rights, conversion rights, and other
preferences of such preferred stock. No shares of preferred stock are currently
issued and outstanding.
INFORMATION CONCERNING NBC FINANCIAL CORPORATION
DESCRIPTION OF BUSINESS
NBC Financial Corporation is a Louisiana corporation and a registered
bank holding company under the Federal Bank Holding Company Act of 1956 (the
"BHC Act"). It was incorporated in 1988 for the purpose of holding all of the
outstanding stock of the Bank, which is the sole subsidiary of NBC Financial
Corporation. At December 31, 1996, NBC Financial Corporation had
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total consolidated assets of approximately $69.3 million and shareholders'
equity of approximately $5.5 million. NBC Financial Corporation's principal
executive office is located at 7777 Jefferson Highway, Baton Rouge, Louisiana
70809, and its telephone number is (504) 234-7777.
The Bank was organized as a national banking association in 1984 and
was converted into a Louisiana state bank in 1992. The Bank provides consumer
and commercial banking services in East Baton Rouge Parish, Louisiana, through
its main banking office at 7777 Jefferson Highway, Baton Rouge, Louisiana 70809
and at a full service branch located at 300 N. Lobdell Avenue, Baton Rouge,
Louisiana 70806. Deposits of the Bank are insured by the FDIC up to applicable
legal limits. The Bank offers an array of deposit services, including demand
accounts, NOW accounts, certificates of deposit and money market accounts, and
provides safe deposit boxes, night depository, individual retirement accounts
and electronic and drive-in banking services. The Bank's lending activities
consist principally of real estate, consumer and commercial loans, with no
material concentration of loans to borrowers in any line of business. At
December 31, 1996, the Bank had outstanding approximately $27 million of loans
to commercial borrowers engaged in various lines of business, representing
approximately 63% of the Bank's total outstanding loans on such date, with the
balance of its loans primarily to consumer and real estate borrowers. The
Bank's deposits represent a cross-section of the area's economy and there is no
material concentration of deposits from any single customer or group of
customers. At December 31, 1996, the Bank had total deposits of approximately
$63.4 million and total assets of approximately $69.3 million.
PROPERTY
The executive offices of NBC Financial Corporation and the Bank are
located at 7777 Jefferson Highway, Baton Rouge, Louisiana 70809 and are owned
by the Bank. The Bank also owns the building and land at 300 N. Lobdell Avenue,
Baton Rouge, Louisiana 70806 where the Bank's sole branch is located. Neither
of the properties owned by the Bank is subject to a mortgage.
EMPLOYEES
NBC Financial Corporation and the Bank have, in the aggregate,
approximately 27 full-time employees. None of NBC Financial Corporation's or
the Bank's employees are subject to a collective bargaining agreement and
management considers its relationship with employees to be good.
COMPETITION
The Bank's general market area consists of East Baton Rouge and
surrounding Parishes in the State of Louisiana. The metropolitan area has an
approximate population of 500,000 and contains numerous banks and other
financial institutions. The Bank experiences substantial competition in
attracting and retaining deposits and making loans.
The primary competitive factors for deposits are interest rates, the
quality and range of financial services offered, convenience of office
locations and office hours. Competition for loan customers is generally a
function of interest rates, loan origination fees and other charges,
restrictive covenants and compensating balances and other services offered. The
Bank competes with numerous other commercial banks, savings associations and
credit unions for customer deposits, as well as with a broad range of financial
institutions in consumer and commercial lending activities. In addition to
banks and savings associations, other businesses in the financial services
industry compete with the Bank for retail and commercial deposit funds and for
retail and commercial loan business.
Competition for loans and deposits is intense among the financial
institutions in the area, and has increased due to recent acquisitions of
community banks by regional holding companies with greater resources than those
of NBC Financial Corporation. The size of these institutions allows certain
economics of scale that permit operation on a narrower profit margin than would
be appropriate for the Bank.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994 (the "Interstate Banking Act") authorized the acquisition of banks in any
state by bank holding companies, subject to compliance with federal and state
antitrust laws, the Community Reinvestment Act (the "CRA") and specific deposit
concentration limits. The Interstate Banking Act removes most state barriers to
interstate acquisitions of banks and ultimately will permit multistate banking
operations to merge into a single bank. Enactment of the Interstate Banking Act
may result in increased competition from out-of-state financial institutions
and their holding companies. See "Information Concerning NBC Financial
Corporation -- Supervision and Regulation."
MARKET PRICES AND DIVIDENDS
MARKET PRICES. NBC Financial Corporation Common Stock is not traded on
any exchange or in any other established public trading market. There are no
bid or asked prices available for NBC Financial Corporation Common Stock. At
February 28, 1997, there were 110 holders of record of NBC Financial
Corporation Common Stock and an additional 6 holders of options to purchase NBC
Financial Corporation Common Stock. No shares of NBC Financial Corporation
Preferred Stock are outstanding.
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CASH DIVIDENDS. NBC Financial Corporation paid cash dividends of $.12
per common share in each of 1996 and 1995, and $.03 in 1994. NBC Financial
Corporation has agreed in the Merger Agreement that it will not pay any
dividend prior to the closing of the Mergers without the consent of Deposit
Guaranty. Deposit Guaranty has consented to the payment of a first quarter
dividend of $.04 per share.
NBC Financial Corporation may pay dividends out of its surplus, unless
it is insolvent or the dividend payment would render it insolvent. In the
absence of surplus, it may pay dividends out of its net profits for the current
year or previous year or both, unless (i) its assets are, or would upon payment
of the dividend be, exceeded by its liabilities or (ii) its net assets are
below or the dividend would reduce its net assets below the aggregate amount
payable on liquidation based upon the issued shares, if any, which have a
preferential right to participate in the corporation's assets in the event of
liquidation.
All of the funds available to NBC Financial Corporation to pay
dividends to its shareholders are derived from dividends paid to it by the
Bank, which are subject to certain legal restrictions. With respect to the
Bank, the prior approval of the Louisiana Commissioner of Financial
Institutions (the "Commissioner") is required if the total of all dividends
declared in any one year will exceed the sum of its net profits of that year
and net profits of the immediately preceding year. Additionally, dividends may
not be declared or paid by a Louisiana state bank unless the bank has
unimpaired surplus equal to 50% of the outstanding capital stock of the bank,
and no dividend payment may reduce the bank's unimpaired surplus below 50%. At
December 31, 1996, the Bank had approximately $957,086 available for the
payment of dividends to NBC Financial Corporation without prior approval of the
Commissioner.
LEGAL PROCEEDINGS
NBC Financial Corporation and the Bank are, from time to time, parties
to routine litigation arising from regular business activities of furnishing
financial services, including providing credit and collecting secured and
unsecured indebtedness. In some instances, such litigation involves claims or
counterclaims against NBC Financial Corporation and the Bank, or either of
them. As of December 31, 1996, NBC Financial Corporation and the Bank had no
litigation pending.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both
federal and state law. Set forth below is a summary description of certain laws
which relate to the regulation of NBC Financial Corporation and the Bank. The
description does not purport to be complete and is qualified in its entirety by
reference to the applicable laws and regulations.
NBC FINANCIAL CORPORATION. NBC Financial Corporation is subject to
regulation under the Louisiana Banking Law ("LBL") and the BHC Act. NBC
Financial Corporation is required to file with the Federal Reserve Board
quarterly and annual reports and such additional information as the Federal
Reserve Board may require pursuant to the BHC Act. The Federal Reserve Board
may conduct examinations of NBC Financial Corporation and its subsidiaries. The
Commissioner imposes similar reporting and examination requirements upon NBC
Financial Corporation under the LBL.
The Federal Reserve Board may require that NBC Financial Corporation
terminate an activity or terminate control of or liquidate or divest certain
subsidiaries or affiliates when the Federal Reserve Board believes the activity
or the control of the subsidiary or affiliate constitutes a significant risk to
the financial safety, soundness or stability of any of its banking
subsidiaries. The Federal Reserve Board also has the authority to regulate
provisions of certain bank holding company debt, including authority to impose
interest ceilings and reserve requirements on such debt. Under certain
circumstances, NBC Financial Corporation must file written notice and obtain
approval from the Federal Reserve Board prior to purchasing or redeeming its
equity securities.
Under the BHC Act and regulations adopted by the Federal Reserve
Board, a bank holding company and its non- banking subsidiaries are prohibited
from requiring certain tie-in arrangements in connection with any extension of
credit, lease or sale of property or furnishing of services. Further, NBC
Financial Corporation is required by the Federal Reserve Board to maintain
certain levels of capital. See "NBC Financial Corporation Management's
Discussion and Analysis of Financial Condition and Results of Operations."
NBC Financial Corporation is required to obtain the prior approval of
the Federal Reserve Board for the acquisition of more than five percent of the
outstanding shares of any class of voting securities or substantially all of
the assets of any bank or bank holding company. Prior approval of the Federal
Reserve Board is also required for the merger or consolidation of NBC Financial
Corporation and another bank holding company.
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NBC Financial Corporation is prohibited by the BHC Act, except in
certain statutorily prescribed instances, from acquiring direct or indirect
ownership or control of more than five percent of the outstanding voting shares
of any company that is not a bank or bank holding company and from engaging
directly or indirectly in activities other than those of banking, managing or
controlling banks or furnishing services to its subsidiaries. However, NBC
Financial Corporation may, subject to the prior approval of the Federal Reserve
Board, engage in any, or acquire shares of companies engaged in, activities
that are deemed by the Federal Reserve Board to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto. In
making any such determination, the Federal Reserve Board is required to
consider whether the performance of such activities by NBC Financial
Corporation or an affiliate can reasonably be expected to produce benefits to
the public, such as greater convenience, increased competition or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest or unsound
banking practices.
Under Federal Reserve Board regulations, a bank holding company is
required to serve as a source of financial and managerial strength to its
subsidiary banks and may not conduct its operations in an unsafe or unsound
manner. In addition, it is the Federal Reserve Board's policy that, in serving
as a source of strength to its subsidiary banks, a bank holding company should
stand ready to use available resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity and should
maintain the financial flexibility and capital-raising capacity to obtain
additional resources for assisting its subsidiary banks. A bank holding
company's failure to meet its obligations to serve as a source of strength to
its subsidiary banks will generally be considered by the Federal Reserve Board
to be an unsafe and unsound banking practice or a violation of the Federal
Reserve Board's regulations or both. This doctrine has become known as the
"source of strength doctrine." Although the United States Court of Appeals for
the Fifth Circuit found the Federal Reserve Board's source of strength doctrine
invalid in 1990, stating that the Federal Reserve Board had no authority to
assert the doctrine under the BHC Act, the decision was reversed by the United
States Supreme Court on procedural grounds. The validity of the source of
strength doctrine is likely to continue to be the subject of litigation until
definitively resolved by the courts or by Congress.
THE BANK. The Bank is subject to primary supervision, examination and
regulation by the Commissioner and the FDIC. If, as a result of an examination
of a bank, the FDIC should determine that the financial condition, capital
resources, asset quality, earnings prospects, management, liquidity or other
aspects of the bank's operations are unsatisfactory or that the bank or its
management is violating or has violated any law or regulation, various remedies
are available to the FDIC. Such remedies include the power to enjoin "unsafe or
unsound practices," to require affirmative action to correct any conditions
resulting from any violation or practice, to issue an administrative order that
can be judicially enforced, to direct an increase in capital, to restrict the
growth of the bank, to assess civil monetary penalties, to remove officers and
directors, and to terminate a bank's deposit insurance.
Various requirements and restrictions under the laws of the United
States and the State of Louisiana affect operations of the Bank. Federal and
Louisiana statutes and regulations relate to many aspects of the Bank's
operations, including reserves against deposits, interest rates payable on
deposits, loans or investments, mergers and acquisitions, borrowings,
dividends, locations of branch offices, capital requirements and disclosure
obligations to depositors and borrowers. Further, the Bank is required to
maintain certain levels of capital. See "NBC Financial Corporation Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
deposits of the Bank are insured by the FDIC in the manner and to the extent
provided by law.
RESTRICTIONS ON TRANSFERS OF FUNDS TO NBC FINANCIAL CORPORATION BY THE
BANK. NBC Financial Corporation is a legal entity separate and distinct from
the Bank. NBC Financial Corporation's ability to pay cash dividends is limited
by Louisiana law. There also are statutory and regulatory limitations on the
amount of dividends which may be paid to NBC Financial Corporation by the Bank.
Louisiana law restricts the amount available for cash dividends by state banks
without approval by the Commissioner. See "Information Concerning NBC Financial
Corporation -- Market Prices and Dividends." The amount of dividends that could
be paid by the Bank to NBC Financial Corporation without prior approval at
December 31, 1996 equaled approximately $957,086.
The FDIC and Federal Reserve Board also have authority to prohibit the
Bank from engaging in what, in their respective opinion, constitutes an unsafe
or unsound practice in conducting the Bank's business. It is possible,
depending upon the financial condition of the Bank and other factors, that the
FDIC or Federal Reserve Board could assert that the payment of dividends or
other payments might, under some circumstances, be such an unsafe or unsound
practice. Further, the FDIC and Federal Reserve Board have established
guidelines with respect to the maintenance of appropriate levels of capital by
banks or bank holding companies under their jurisdiction. Compliance with the
standards set forth in such guidelines and other provisions of federal law
could limit the amount of dividends which the Bank or NBC Financial Corporation
may pay.
Substantially all of NBC Financial Corporation's revenues, on an
unconsolidated basis, including funds available for the payment of dividends
and other operating expenses, are the result of dividends paid by the Bank.
28
<PAGE> 39
The Bank is subject to certain restrictions imposed by federal law on
any extensions of credit to, or the issuance of a guarantee or letter of credit
on behalf of, NBC Financial Corporation or other affiliates, the purchase of or
investments in stock or other securities thereof, the taking of such securities
as collateral for loans and the purchase of assets of NBC Financial Corporation
or other affiliates. Such restrictions prevent NBC Financial Corporation and
such other affiliates from borrowing from the Bank unless the loans are secured
by marketable obligations of designated amounts. Further, such secured loans
and investments by the Bank to or in NBC Financial Corporation or to or in any
other affiliate is limited to 10 percent of the Bank's capital and surplus (as
defined by federal regulations) and such secured loans and investments are
limited, in the aggregate, to 20 percent of the Bank's capital and surplus (as
defined by federal regulations). Additional restrictions on transactions with
affiliates may be imposed on the Bank under other provisions of federal law.
PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS. Federal law
requires each federal banking agency to take prompt corrective action to
resolve the problems of insured depository institutions, including but not
limited to those that fall below one or more prescribed minimum capital ratios.
The law requires each federal banking agency to promulgate regulations defining
the following five categories in which an insured depository institution will
be placed, based on the level of its capital ratios: well capitalized,
adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized. At December 31, 1996 and 1995, the Bank was
categorized as "Well Capitalized."
In addition to measures taken under the prompt corrective action
provisions, commercial banking organizations may be subject to potential
enforcement actions by federal regulators for unsafe or unsound practices in
conducting their businesses or for violations of any law, rule, regulation or
any condition imposed in writing by the agency or any written agreement with
the agency. Enforcement actions may include the imposition of a conservator or
receiver, the issuance of a cease and desist order that can be judicially
enforced, the termination of insurance of deposits (in the case of a depository
institution), the imposition of civil money penalties, the issuance of
directives to increase capital, the issuance of formal and informal agreements,
the issuance of removal and prohibition orders against institution-affiliated
parties and the enforcement of such actions through injunctions or restraining
orders based upon a judicial determination that the agency would be harmed if
such equitable relief was not granted.
SAFETY AND SOUNDNESS STANDARDS. In July 1995, the federal banking
agencies adopted final guidelines establishing standards for safety and
soundness, as required by the Federal Deposit Insurance Corporation Improvement
Act of 1991 ("FDICIA"). The guidelines set forth operational and managerial
standards relating to internal controls, information systems and internal audit
systems, loan documentation, credit underwriting, interest rate exposure, asset
growth and compensation, fees and benefits. Guidelines for asset quality and
earnings standards will be adopted in the future. The guidelines establish the
safety and soundness standards that the agencies will use to identify and
address problems at insured depository institutions before capital becomes
impaired. If an institution fails to comply with a safety and soundness
standard, the appropriate federal banking agency may require the institution to
submit a compliance plan. Failure to submit a compliance plan or to implement
an accepted plan may result in enforcement action.
INTERSTATE BANKING AND BRANCHING. Under the Interstate Banking Act, a
bank holding company that is adequately capitalized and managed may obtain
approval under the BHC Act to acquire an existing bank located in another state
without regard to state law. A bank holding company would not be permitted to
make such an acquisition if, upon consummation, it would control (a) more than
10% of the total amount of deposits of insured depository institutions in the
United States or (b) 30% or more of the deposits in the state in which the bank
is located. A state may limit the percentage of total deposits that may be held
in that state by any one bank or bank holding company if application of such
limitation does not discriminate against out-of-state banks. An out-of-state
bank holding company may not acquire a state bank in existence for less than a
minimum length of time that may be prescribed by state law except that a state
may not impose more than a five year existence requirement.
The Interstate Banking Act also permits, beginning June 1, 1997,
mergers of insured banks located in different states and conversion of the
branches of the acquired bank into branches of the resulting bank. Each state
may permit such combinations earlier than June 1, 1997, and may adopt
legislation to prohibit interstate mergers after that date in that state or in
other states by that state's banks. The same concentration limits discussed in
the preceding paragraph apply. Louisiana has not adopted legislation to "opt
out" of interstate mergers. The Interstate Banking Act also permits a national
or state bank to establish branches in a state other than its home state if
permitted by the laws of that state, subject to the same requirements and
conditions as for a merger transaction.
The Interstate Banking Act will likely increase competition from
out-of-state banks in the markets in which NBC Financial Corporation operates,
although it is difficult to assess the impact that such increased competition
may have on NBC Financial Corporation's operations.
29
<PAGE> 40
COMMUNITY REINVESTMENT ACT. Under the CRA, a bank's applicable
regulatory authority (which is the FDIC for the Bank) is required to assess the
record of each financial institution which it regulates to determine if the
institution meets the credit needs of its entire community, including low- and
moderate-income neighborhoods served by the institution, and to take that
record into account in its evaluation of any application made by such
institution for, among other things, approval of the acquisition or
establishment of a branch or other deposit facility, an office relocation, a
merger or the acquisition of shares of capital stock of another financial
institution. The regulatory authority prepares a written evaluation of an
institution's record of meeting the credit needs of its entire community and
assigns a rating. The Bank has undertaken significant actions to comply with
the CRA. The Bank received a "Satisfactory" rating in its most recent review by
federal regulators with respect to its compliance with the CRA.
30
<PAGE> 41
SUPPLEMENTAL FINANCIAL INFORMATION OF NBC FINANCIAL CORPORATION
INVESTMENT SECURITIES
The following table sets forth the carrying amounts of investment
securities at the dates indicated (In thousands):
<TABLE>
<CAPTION>
December 31
-----------------
1996 1995
-----------------
<S> <C> <C>
U.S. Treasury securities and obligations of other U.S.
Government agencies and corporations $14,144 $14,616
Obligations of state and political subdivisions 410 316
Mortgage-backed bonds and collateralized
mortgage obligations 256 346
------- -------
Total $14,810 $15,278
======= =======
</TABLE>
RISK ELEMENTS
The following table summarizes nonperforming loans at December 31,
1996 and 1995 (In thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Nonaccrual loans $ 199 $ 23
Accruing loans past due 90 days or more -- --
Restructured loans not included above -- --
</TABLE>
DEPOSITS
The average deposits are summarized for the period indicated in the
following tables (In thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------
1996 1995
-----------------
Amount Amount
-----------------
<S> <C> <C>
Noninterest-bearing demand deposits $ 9,065 $ 7,027
Interest-bearing demand deposits 6,226 6,242
Money Market deposits 5,173 4,703
Savings deposits 1,588 786
Time deposits 35,104 30,427
------- -------
Total $57,156 $49,185
======= =======
</TABLE>
Maturities of time deposits of $100,000 or more outstanding as of
December 31, 1996 are summarized as follows (In thousands):
<TABLE>
<CAPTION>
Time Certificates of Deposit
----------------------------
<S> <C>
3 months or less $ 2,286
Over 3 through 12 months 3,671
Over 12 months 2,671
-------
Total $ 8,628
========
</TABLE>
31
<PAGE> 42
EARNING ASSET/INTEREST BEARING LIABILITIES YIELDS AND RATES
The following table shows the average balances and yields for interest-
earning assets and interest-bearing liabilities for 1996 and 1995 on a
tax-equivalent basis (In thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1996 Year Ended December 31, 1995
---------------------------------- ------------------------------
Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Real estate loans $ 15,904 $ 1,479 9.30% $ 15,384 $ 1,531 9.95%
Installment loans 4,559 421 9.23 3,325 325 9.77
Commercial and Industrial loans 19,057 1,958 10.27 15,471 1,622 10.48
U.S. Treasury and government agency
securities 15,232 913 5.99 13,210 856 6.48
Municipal securities 395 27 6.84 91 6 6.59
Other securities 233 16 6.87 233 15 6.44
Federal funds sold and securities
purchased under agreements to resell 1,747 91 5.21 283 74 5.91
-------- -------- -------- --------
Total earning assets $ 57,127 4,905 8.59 $ 47,997 4,429 9.23
======== ======== ======== ========
INTEREST BEARING LIABILITIES:
Interest-bearing transaction accounts $ 6,226 176 2.83 $ 6,242 177 2.84
Money market deposits 5,173 159 3.07 4,703 136 2.89
Savings deposits 1,588 55 3.46 786 19 2.42
Time deposits 35,104 1,970 5.61 30,427 1,691 5.56
Federal funds purchased and securities
sold under agreements to repurchase 283 16 5.65 167 10 5.99
-------- -------- -------- --------
Total interest-bearing liabilities $ 48,374 2,376 4.91 $ 42,325 2,033 4.80
======== ======== ======== ========
Net interest income, tax equivalent $ 2,529 $ 2,396
======== ========
Net interest margin, tax equivalent 4.43% 4.99%
========= ========
Net interest spread 3.68% 4.43%
========= ========
</TABLE>
VOLUME/RATE ANALYSIS
The following table shows the changes in components of net interest income
caused by changes in average earning asset and liability volumes and changes in
rates for 1996 and 1995 (In thousands):
<TABLE>
<CAPTION>
1996 Compared To 1995 1995 Compared To 1994
----------------------- -----------------------
Volume Rate Net Volume Rate Net
------ ---- ------ ------ ---- ---
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Real estate loans $ 52 $ (104) $ (52) $ 61 $ 160 $ 221
Installment loans 121 (25) 96 100 43 143
Commercial and Industrial loans 376 (40) 336 560 48 608
U. S. Treasury and government
agency securities 131 (74) 57 12 172 184
Municipal securities 20 1 21 -- 4 4
Other securities -- 1 1 2 9 11
Federal funds sold and securities
purchased under agreements to
resell 87 (70) 17 14 46 60
------ ------ ------ ------ ------ ------
Total earning assets 787 (311) 476 749 482 1,231
------ ------ ------ ------ ------ ------
(continued)
</TABLE>
32
<PAGE> 43
<TABLE>
<CAPTION>
1996 Compared To 1995 1995 Compared To 1994
---------------------- -----------------------
Volume Rate Net Volume Rate Net
------ ---- --- ------ ---- ---
<S> <C> <C> <C> <C> <C> <C>
INTEREST BEARING LIABILITIES:
Interest-bearing transaction accounts -- (1) (1) (64) 12 (52)
Money market deposits 14 9 23 3 15 18
Savings deposits 19 17 36 2 (1) 1
Time deposits 260 19 279 512 354 866
Federal funds purchased and securities
sold under agreements
to repurchase 7 (1) 6 (18) 2 (16)
----- ----- ----- ----- ----- -----
Total interest-bearing liabilities 300 43 343 435 382 817
----- ----- ----- ----- ----- -----
Net interest income, tax equivalent $ 487 $(354) $ 133 $ 314 $ 100 $ 414
===== ===== ===== ===== ===== =====
</TABLE>
The increase (decrease) due to changes in average balances reflected in
the above table was calculated by applying the preceding year's rate to the
current year's change in the average balance. The increase (decrease) due to
changes in average rates was calculated by applying the current year's change
in the average rates to the current year's average balance. Using this method
of calculating increases (decreases), and increase or decrease due to both
changes in average balances and rates is reflected in the changes attributable
to average rate changes.
RETURN ON EQUITY AND ASSETS
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------
1996 1995
---- ----
<S> <C> <C>
Return on average assets .74% 1.21%
Return on average equity 8.96 13.98
Dividend payout ratio 14.12 9.84
Average equity to average assets 8.23 8.66
</TABLE>
LOAN PORTFOLIO
The table below sets forth the Bank's loan distribution at the end of
each of the last two (2) years (In thousands):
<TABLE>
<CAPTION>
December 31,
----------------
1996 1995
---- ----
<S> <C> <C>
Commercial, financial and agricultural $17,580 $19,516
Real estate - mortgage 18,322 13,846
Real estate - construction 4,858 1,812
Installment 1,902 2,865
------- -------
Total $42,662 $38,039
======= =======
</TABLE>
33
<PAGE> 44
The following table shows the maturity or repricing frequency of loans
outstanding as of December 31, 1996 (In thousands):
<TABLE>
<S> <C>
Maturity of fixed rate Loans:
Within one year $ 5,024
After one but within five years 9,139
After five years 7,156
-------
Total fixed rate loans 21,319
Variable rate loans repricing at least quarterly 21,144
Nonaccrual loans 199
-------
Total loans $42,662
=======
</TABLE>
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes the Bank's loan loss experience for
each of the two (2) years ended (In thousands):
<TABLE>
<CAPTION>
December 31,
--------------
1996 1995
---- ----
<S> <C> <C>
Balance at beginning of period $ 551 $ 476
Charge-offs:
Commercial, financial and agricultural 187 --
Installment 102 38
----- -----
Total Charge-offs 289 38
----- -----
Recoveries:
Commercial, financial and agricultural 200 44
Installment 15 4
----- -----
Total Recoveries 215 48
----- -----
Net charge-offs (recoveries) 74 (10)
Provision charged to operations 168 65
----- -----
Balance at end of period 645 551
===== =====
Ratio of net charge-offs to average loans outstanding .19% (.03)%
</TABLE>
CAPITAL RATIOS
The following table sets forth the capital amounts and ratios required
by regulation and the Bank's actual capital ratios and amounts:
<TABLE>
<CAPTION>
To Be Well
Capitalized
Under Prompt
For Capital Corrective Action
Actual Adequacy Purposes Provisions
------ ----------------- ----------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk Weighted Assets):
Bank of Commerce $5,979 12.72% $3,760 8.00% $4,700 10.00%
Tier 1 Capital (to Risk Weighted Assets):
Bank of Commerce $5,392 11.47% $1,880 4.00% $2,820 6.00%
Tier 1 Capital (to Average Assets):
Bank of Commerce $5,392 8.30% $2,599 4.00% $3,429 5.00%
As of December 31, 1995
Total Capital (to Risk Weighted Assets):
Bank of Commerce $5,528 13.28% $3,330 8.00% $4,162 10.00%
Tier 1 Capital (to Risk Weighted Assets):
Bank of Commerce $5,008 12.03% $1,665 4.00% $2,497 6.00%
Tier 1 Capital (to Average Assets):
Bank of Commerce $5,008 8.78% $2,282 4.00% 2,852 5.00%
</TABLE>
34
<PAGE> 45
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
OWNERSHIP OF PRINCIPAL SHAREHOLDERS
As of the Record Date, no person was known by NBC Financial Corporation to
be the beneficial owner of more than five percent of the outstanding shares of
NBC Financial Corporation Common Stock.
OWNERSHIP OF MANAGEMENT
The following table indicates the beneficial ownership as of the Record Date
of NBC Financial Corporation Common Stock by (i) each director of NBC Financial
Corporation, (ii) the Chief Executive Officer of NBC Financial Corporation
(also a director), and (iii) all directors and executive officers of NBC
Financial Corporation as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME & POSITION OWNED BENEFICIALLY* PERCENT OF CLASS*
- --------------- ------------------- -----------------
<S> <C> <C> <C>
Thomas A. Boone, Director & C.E.O. 55,465 (1) 9.95%
William A. Couvillion, DDS, Director 23,409 4.20%
Douglas J. Daly, Director 19,510 3.50%
Douglas K. Durnin, Director 22,045 (2) 3.95%
Thomas H. Heard, Director 28,480 (3) 5.11%
John L. Kaiser, Director 42,604 (4)(5) 7.64%
Richard F. Norem, Sr., Director 16,538 (6) 2.97%
Mark A. Wilson, Director 24,106 (7)(8) 4.32%
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (9 PERSONS) 238,157 42.72%
</TABLE>
- -------------------------
*Assumes exercise of all options issued, outstanding and fully vested by
the holders thereof.
(1) Includes 46,777 shares on which Mr. Boone holds an option to purchase, in
which he is fully vested.
(2) Includes 19,615 shares held by A. K. Durnin Chrysler-Plymouth, Inc., of
which Mr. Durnin is the President.
(3) Includes 2,088 shares held by various members of Mr. Heard's family.
(4) Includes 38,308 shares held by Kaiser Rentals, a partnership in which Mr.
Kaiser is a full partner.
(5) Includes 2,160 shares held by various members of Mr. Kaiser's family.
(6) Includes 3,193 shares held by various members of Mr. Norem's family.
(7) Includes 12,056 shares held by Woodrow Wilson Construction Co., Inc., of
which Mr. Wilson is President.
(8) Includes 11,464 shares held by Lincoln Trust Co. for the benefit of Mr.
Wilson's self-directed IRA.
35
<PAGE> 46
NBC FINANCIAL CORPORATION MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of NBC Financial Corporation should be read in
conjunction with the consolidated financial statements, accompanying footnotes,
and other supplemental financial information appearing elsewhere in this Proxy
Statement/Prospectus.
1996 COMPARED WITH 1995
BALANCE SHEET
Total assets increased to $69.3 million at December 31, 1996, an
increase of 16% from $59.5 million at December 31, 1995. Total loans increased
$4.7 million, or 12%, to $42.7 million compared to $38.0 million at December
31, 1995, while securities declined $468 thousand to $14.8 million at December
31, 1996, primarily in order to fund a portion of the increased loan volume. At
December 31, 1996, the Bank had $5.3 million in federal funds sold due to a
$3.3 million increase in deposit volumes during December. The proceeds from
December's deposit growth remain liquid at year-end 1996 to fund anticipated
loan growth and purchase securities.
Total deposits increased by $9.2 million to $63.4 million at December
31, 1996, a 17% increase from the $54.2 million reported at December 31, 1995.
Noninterest bearing deposits grew at a 22% rate, compared to a 16% growth in
interest-bearing deposits which was mostly concentrated in certificates of
deposit. The deposit growth that occurred during 1996 was the result of the
continued development of commercial relationships, some seasonal growth at
year-end, and aggressive pricing on certificates of deposit. The Bank has been
aggressively gathering deposits to increase market share and fund continued
loan growth. A significant portion of the deposit growth for 1996 occurred
during the fourth quarter.
NET INCOME
Net income for the year ended December 31, 1996 was $459 thousand,
down $188 thousand from the $647 thousand reported for 1995. The decline was
primarily attributable to an increase in the effective tax rate from 9.92% in
1995 to 33.06% in 1996 which contributed to an increase in income tax expense
of $155 thousand. The abnormally low effective tax rate for 1995 resulted from
the utilization of net operating loss carryforwards from prior years that had
been previously recognized in the financial statements. Such net operating loss
carryforwards were fully utilized during 1995. Also contributing to the
decrease in net income is an increase in the provision for loan losses of
approximately $100 thousand from 1995 to 1996. On a per common share basis, net
income was $.85 for 1996, compared to $1.22 during 1995.
NET INTEREST INCOME
The largest component of revenue, net interest income, increased $126
thousand to $2.52 million for 1996, generating a net interest margin of 4.43%,
compared to 4.99% during 1995. Increased competition in loan and deposit rates
contributed to the decline in the margin. During 1996, the average loan yields
declined 42 basis points due to competition and a decline in the indices
underlying the Bank's variable rate loan portfolio. The overall yield on the
Bank's securities portfolio also declined 45 basis points consistent with
market trends. Increased loan and deposit volumes, however, led to the overall
increase in net interest income. The Bank maintained an aggressive deposit
pricing posture which is responsible for much of the deposit volume growth.
Rates on interest checking accounts and time deposits remain consistent with
1995 rates while rates on savings and money market deposits increased an
average of 33 basis points.
PROVISION FOR POSSIBLE LOAN LOSSES
As a result of management's assessment of the adequacy of the
allowance for possible loan losses, the Bank recorded a loan loss provision of
$168 thousand for 1996, compared to $65 thousand for 1995. The increase in the
provision for possible loan losses from 1995 is primarily attributable to the
increase in loan volumes. Credit quality has remained at acceptable levels and
relatively stable over the past two years despite loan volume growth. The
year-end 1996 allowance for possible loan losses was $645 thousand, after net
charge-offs of $74 thousand or 1.51% of total loans, compared to $551 thousand,
including net recoveries of $10 thousand, or 1.45% of total loans, at December
31, 1995. The Bank's policy is to maintain the balance in the allowance for
36
<PAGE> 47
possible loan losses at approximately 1.5% of the outstanding loan balance,
adjusted periodically as credit quality and loan volume dictates.
NONINTEREST INCOME
Noninterest income totaled $321 thousand for the year ended December
31, 1996, up 38% from the $233 thousand reported for the year ended December
31, 1995, due primarily to the effect of a full year income in 1996 for leased
space in the Bank's Jefferson Highway office, as well as increased service
charges and fees on deposit accounts. Service charge revenue did not increase
proportionately with the increase in deposit volumes due to the use of
discounted demand deposit products to increase market share and gather funds to
support loan demand.
NONINTEREST EXPENSE
Noninterest expense for the year ended December 31, 1996 totaled
$1.988 million, an increase of $144 thousand or 8% over the $1.844 million for
the year ended December 31, 1995. Salaries and benefits increased $71 thousand,
a 7% increase from 1995, while other noninterest expenses increased by $72
thousand, a 9% increase, to $907 thousand, due primarily to increased data
processing costs and legal and other fees associated with the conversion of NBC
Financial Corporation's outstanding preferred stock to common stock in early
1996. Much of the increase in expenses is related to the growth in loan and
deposit volumes. The Bank's ability to efficiently generate revenue improved
from 1995 as evidenced by the 39 basis point decline in the efficiency ratio
to 69.75% for 1996.
LEGAL OPINION
Watkins Ludlam & Stennis, P.A., of Jackson, Mississippi has rendered
its opinion that the shares of Deposit Guaranty Common Stock to be issued in
connection with the Mergers have been duly authorized and, if and when issued
pursuant to the terms of the Merger Agreement, will be validly issued, fully
paid and non-assessable.
EXPERTS
The consolidated financial statements of Deposit Guaranty as of
December 31, 1996 and 1995, and for each of the years in the three-year period
ended December 31, 1996, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, also incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing. The report of KPMG Peat Marwick LLP covering the December 31, 1994
consolidated financial statements refers to a change in the method of
accounting for debt securities.
The consolidated financial statements of NBC Financial Corporation as
of December 31, 1996 and 1995, and for each of the years in the three-year
period ended December 31, 1996, have been included herein and in the
Registration Statement in reliance upon the report of Hannis T. Bourgeois &
Co., L.L.P., independent certified public accountants, also included herein,
and upon the authority of said firm as experts in accounting and auditing.
OTHER MATTERS
As of the date of this Proxy Statement/Prospectus, the Board of
Directors of NBC Financial Corporation knows of no matters which will be
presented for consideration at the Meeting other than as set forth in the
notice of such Meeting attached to this Proxy Statement/Prospectus. However, if
any other matters shall come before the Meeting or any adjournment or
postponement thereof and be voted upon, the enclosed proxy shall be deemed to
confer discretionary authority to the individuals named as proxies therein to
vote the shares represented by such proxy as to any such matters.
37
<PAGE> 48
INDEX TO FINANCIAL STATEMENTS
NBC FINANCIAL CORPORATION AND SUBSIDIARY
Page
Independent Auditors' Report F-2
Consolidated Balance Sheets at December 31, 1996 and 1995 F-3
Consolidated Statements of Income for each of the Years in the
Three Year Period Ended December 31, 1996 F-4
Consolidated Statements of Changes in Stockholders' Equity for each
of the Years in the Three Year Period Ended December 31, 1996 F-5
Consolidated Statements of Cash Flows for each of the Years in
the Three Year Period Ended December 31, 1996 F-7
Notes to Consolidated Financial Statements for each of the Years in the
Three Year Period Ended December 31, 1996 F-9
F-1
<PAGE> 49
January 10, 1997
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
NBC Financial Corporation
and Subsidiary
Baton Rouge, Louisiana
We have audited the accompanying Consolidated Balance Sheets of NBC
Financial Corporation and Subsidiary as of December 31, 1996 and 1995, and the
related Consolidated Statements of Income, Changes in Stockholders' Equity, and
Cash Flows for each of the three years in the period ended December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of NBC Financial
Corporation and Subsidiary as of December 31, 1996 and 1995, and the results of
its operations, changes in its stockholders' equity and its cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
Respectfully submitted,
/s/ HANNIS T. BOURGEOIS & CO., L.L.P.
<PAGE> 50
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash and Due from Banks - Note B $ 3,693,603 $ 2,886,033
Federal Funds Sold 5,300,000 600,000
Securities - Note C:
Held to Maturity (Fair Value $6,134,985 and $4,488,478) $ 6,190,633 $ 4,532,032
Available for Sale (Amortized Cost $8,699,292 and $10,703,542) 8,619,545 10,746,235
------------ ------------
$ 14,810,178 $ 15,278,267
Loans - Notes D and O $ 42,662,310 $ 38,039,089
Less: Allowance for Loan Losses - Note E (645,191) (550,869)
------------ ------------
$ 42,017,119 $ 37,488,220
Bank Premises and Equipment - Note F 2,471,305 2,311,365
Other Real Estate 390,000 344,564
Accrued Interest Receivable 445,954 430,521
Other Assets 160,966 120,545
------------ ------------
TOTAL ASSETS $ 69,289,125 $ 59,459,515
============ ============
LIABILITIES
Deposits - Note G:
Non-Interest Bearing $ 11,425,697 $ 9,372,310
Interest Bearing 51,943,547 44,814,027
------------ ------------
$ 63,369,244 $ 54,186,337
Accrued Interest Payable 192,793 166,217
Other Liabilities 227,841 21,537
------------ ------------
TOTAL LIABILITIES $ 63,789,878 $ 54,374,091
Commitments and Contingencies - Notes M, N, O and Q
STOCKHOLDERS' EQUITY
Capital Stock:
Preferred Stock - $25 par value; 8% Preferred Stock; 1,000,000 Shares
Authorized; 0 and 18,219 Shares Issued and Outstanding -
Note I $ 0 $ 455,475
Common Stock - $1 par value; 10,000,000 and 1,000,000 Shares
Authorized and 469,660 and 420,000 Shares Issued and
Outstanding, Respectively - Notes H and I 469,660 420,000
Surplus 5,441,964 4,932,750
Retained Earnings (Deficit) (359,743) (750,993)
Unrealized Gain (Loss) on Securities Available for Sale, Net - Note C (52,634) 28,192
------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ 5,499,247 $ 5,085,424
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 69,289,125 $ 59,459,515
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 51
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Interest Income:
Interest and Fees on Loans $ 3,858,101 $ 3,478,100 $ 2,505,988
Interest on Securities - Taxable 929,176 870,419 675,760
Other Interest Income 108,759 78,505 14,606
----------- ----------- -----------
Total Interest Income $ 4,896,036 $ 4,427,024 $ 3,196,354
Interest Expense:
Interest Expense on Deposits - Note G $ 2,359,232 $ 2,023,376 $ 1,189,738
Other Interest Expense 16,376 9,672 25,559
----------- ----------- -----------
Total Interest Expense $ 2,375,608 $ 2,033,048 $ 1,215,297
----------- ----------- -----------
Net Interest Income $ 2,520,428 $ 2,393,976 $ 1,981,057
Provision (Credit) for Loan Losses - Note E 168,435 65,000 0
----------- ----------- -----------
Net Interest Income after Provision
(Credit) for Loan Losses $ 2,351,993 $ 2,328,976 $ 1,981,057
Gain (Loss) on Securities - Note C (5,637) (14,582) (206,600)
Net Other Real Estate Income 85,961 46,192 34,027
Other Operating Income 240,897 201,660 100,409
----------- ----------- -----------
Income before Other Expenses $ 2,673,214 $ 2,562,246 $ 1,908,893
Other Expenses:
Salaries and Employee Benefits - Note J $ 1,081,229 $ 1,009,777 $ 908,633
Occupancy Expense 97,963 84,639 45,574
Other Operating Expenses - Note K 808,602 749,672 663,673
----------- ----------- -----------
Total Other Expenses $ 1,987,794 $ 1,844,088 $ 1,617,880
----------- ----------- -----------
Income before Income Taxes $ 685,420 $ 718,158 $ 291,013
Applicable Income Taxes - Note L 226,618 71,300 (76,900)
----------- ----------- -----------
Net Income $ 458,802 $ 646,858 $ 367,913
=========== =========== ===========
Per Common Share - Note I:
Net Income $ .85 $ 1.22 $ .68
=========== =========== ===========
Cash Dividends $ .12 $ .12 $ .03
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 52
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Preferred Stock:
Balance - Beginning of Year $ 455,475 $ 455,475 $ 455,475
Deductions:
Redemption of Preferred Stock (6,250) 0 0
Conversion to Common Stock (448,924) 0 0
Payment of Fractional Shares (301) 0 0
----------- ----------- -----------
Balance - End of Year $ 0 $ 455,475 $ 455,475
=========== =========== ===========
Common Stock:
Balance - Beginning of Year $ 420,000 $ 105,000 $ 104,000
Additions:
Transferred Due To Stock Split in the Form of a Dividend 0 315,000 0
Issued 1,000 Shares of NBC Financial Corporation
Common Stock - $1 Par Value 0 0 1,000
Issued 15,800 Shares of NBC Financial Corporation
Common Stock - $1 Par Value 15,800 0 0
Issued 33,860 Shares of NBC Financial Corporation
Common Stock - $1 Par Value - Converted from
Preferred Stock 33,860 0 0
----------- ----------- -----------
Balance - End of Year $ 469,660 $ 420,000 $ 105,000
=========== =========== ===========
Surplus:
Balance - Beginning of Year $ 4,932,750 $ 4,932,750 $ 4,908,750
Additions:
Issued 1,000 Shares of Common Stock at $25.00
per share ($1 Par Value) 0 0 24,000
Issued 15,800 Shares of Common Stock at $6.96 per
share ($1 Par Value) - Converted Stock Options 94,150 0 0
Issued 33,860 Shares of Common Stock
($1 Par Value) - Converted from Preferred Stock 415,064 0 0
----------- ----------- -----------
Balance - End of Year $ 5,441,964 $ 4,932,750 $ 4,932,750
=========== =========== ===========
Retained Earnings (Deficit):
Balance - Beginning of Year $ (750,993) $ (996,000) $(1,317,886)
Net Income 458,802 646,858 367,913
Transferred Due To Stock Split in the
Form of a Dividend 0 (315,000) 0
Cash Dividends Declared:
Class "A" Cumulative Preferred (2,300) (6,900) (6,900)
Class "B" Cumulative Preferred (1,440) (4,320) (4,320)
Class "C" Cumulative Preferred (8,936) (25,218) (25,218)
Common Stock (54,876) (50,413) (9,589)
----------- ----------- -----------
Balance - End of Year $ (359,743) $ (750,993) $ (996,000)
=========== =========== ===========
</TABLE>
(continued)
<PAGE> 53
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Unrealized Gain (Loss) on Securities Available for Sale:
Balance - Beginning of Year $ 28,192 $(323,629) $ (3,807)
Net Change in Unrealized Gain (Loss) on
Securities Available for Sale (80,826) 351,821 (319,822)
--------- --------- ---------
Balance - End of Year $ (52,634) $ 28,192 $(323,629)
========= ========= =========
Treasury Stock:
Balance - Beginning of Year $ 0 $ 0 $ 24,000
Deductions:
Re-issuance of 450 Shares of Common Stock and
500 Shares of Preferred Stock 0 0 (24,000)
--------- --------- ---------
Balance - End of Year $ 0 $ 0 $ 0
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 54
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 458,802 $ 646,858 $ 367,913
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Depreciation and Amortization 96,798 82,585 49,988
Provision (Credit) for Loan Losses 168,435 65,000 0
Cost of Treasury Stock Re-Issued 0 0 24,000
Provision (Benefit) for Deferred Taxes 300 71,300 (76,900)
Amortization (Accretion) of Premiums
(Discounts) on Securities 4,862 (80,695) 88,107
(Gain) Loss on Sale of Fixed Assets (2,927) 0 0
(Gain) Loss on Sales of Securities 5,637 14,582 206,600
(Gain) Loss on Sales of Other Real Estate 0 0 (14,080)
(Increase) Decrease in Accrued Interest
Receivable (15,433) (118,103) (65,821)
(Increase) Decrease in Other Assets (44,357) (2,296) 27,723
Increase (Decrease) in Accrued Interest
Payable 26,576 75,768 16,523
Increase (Decrease) in Other Liabilities 206,303 (65,825) (33,428)
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 904,996 $ 689,174 $ 590,625
Cash Flows From Investing Activities:
Net (Increase) Decrease in Federal Funds Sold $(4,700,000) $ 200,000 $ 50,000
Proceeds from Sales of Securities 1,592,046 490,313 5,015,702
Proceeds from Maturities of Securities 4,307,000 5,650,000 2,000,000
Proceeds from Return of Principal on Certain
Mortgage-Backed Securities 71,178 109,121 469,809
Purchases of Securities (5,635,078) (8,145,282) (6,262,754)
Net (Increase) Decrease in Loans (4,697,334) (7,644,073) (6,290,462)
Purchases of Bank Premises and Equipment (261,394) (224,142) (1,301,239)
Proceeds from Sale of Fixed Assets 7,400 0 0
Proceeds from Sales of Other Real Estate 0 0 14,080
----------- ----------- -----------
NET CASH (USED IN)
INVESTING ACTIVITIES $(9,316,182) $(9,564,063) $(6,304,864)
</TABLE>
(continued)
<PAGE> 55
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Financing Activities:
Net Increase (Decrease) in Demand Deposits,
NOW, Money Market, and Savings Accounts $ 3,791,675 $ 2,075,113 $ 680,740
Net Increase (Decrease) in Certificates of Deposit 5,391,233 8,889,872 4,415,354
Net Increase (Decrease) in Borrowed Funds 0 (900,000) 900,000
Proceeds From Issuance of Common Stock 109,950 0 25,000
Redemption of Preferred Stock (6,250) 0 0
Payment of Fractional Shares of Preferred Stock (301) 0 0
Cash Dividends (67,551) (86,851) (46,027)
----------- ----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES $ 9,218,756 $ 9,978,134 $ 5,975,067
----------- ----------- -----------
INCREASE IN CASH AND DUE FROM BANKS $ 807,570 $ 1,103,245 $ 260,828
CASH AND DUE FROM BANKS - BEGINNING OF YEAR 2,886,033 1,782,788 1,521,960
----------- ----------- -----------
CASH AND DUE FROM BANKS - END OF YEAR $ 3,693,603 $ 2,886,033 $ 1,782,788
=========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash Payments for:
Interest Paid to Depositors $ 2,332,656 $ 1,946,696 $ 1,173,214
=========== =========== ===========
Interest Paid on Borrowed Funds $ 16,376 $ 10,767 $ 25,559
=========== =========== ===========
Income Tax Payments (Refunds) $ 15,788 $ 0 $ 0
=========== =========== ===========
Supplemental Schedule of Noncash Investing and
Financing Activities:
Change In Unrealized Gain (Loss) on Securities
Available for Sale $ (122,440) $ 366,322 $ (319,822)
=========== =========== ===========
Change in the Deferred Tax Effect on Unrealized
Gain (Loss) on Securities Available for Sale $ 41,500 $ (14,500) $ 0
=========== =========== ===========
Transfer from Retained Earnings Due to Stock
Split in the Form of a Dividend $ 0 $ 315,000 $ 0
=========== =========== ===========
Transactions Resulting From Conversion of
Preferred Stock to Common Stock:
Common Stock $ 33,860 $ 0 $ 0
Surplus 415,064 0 0
----------- ----------- -----------
$ 448,924 $ 0 $ 0
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE> 56
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
================================================================================
NOTE A
================================================================================
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting principles followed by NBC Financial Corporation and its wholly
owned Subsidiary, Bank of Commerce, are those which are generally practiced
within the banking industry. The methods of applying those principles conform
with generally accepted accounting principles and have been applied on a
consistent basis. The principles which significantly affect the determination
of financial position, results of operations, changes in stockholders' equity
and cash flows are summarized below.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of NBC Financial
Corporation (the Company), and its wholly owned subsidiary, Bank of Commerce
(the Bank). All material intercompany accounts and transactions have been
eliminated. Certain reclassifications to previously published financial
statements have been made to comply with current reporting requirements.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
SECURITIES
In accordance with the provisions of FASB Statement 115, securities are divided
into two separate classifications - held to maturity and available for sale.
The Bank does not engage in trading activities.
Securities classified as held to maturity are those debt securities that the
Bank has both the intent and the ability to hold to maturity regardless of
changes in market conditions, liquidity needs or changes in general economic
conditions. These securities are carried at cost adjusted for amortization of
premium and accretion of discount, computed by the interest method over their
contractual lives.
Securities classified as available for sale are those debt securities that the
Bank intends to hold for an indefinite period of time but not necessarily to
maturity. Any decision to sell a security classified as available for sale
would be based on various factors, including significant movements in interest
rates, changes in the maturity mix of the Bank's assets and liabilities,
liquidity needs, regulatory capital considerations, and other similar factors.
Securities available for sale are carried at fair value. Unrealized gains or
losses are reported as increases or decreases in stockholders' equity, net of
the related deferred tax effect. Realized gains or losses, determined on the
basis of the cost of specific securities sold, are included in earnings.
LOANS
Loans are stated at principal amounts outstanding, less the allowance for loan
losses. Interest on commercial and installment loans is accrued daily, based
on the principal outstanding using the simple-interest method.
The Bank discontinues the accrual of interest income when a loan becomes 90
days past due as to principal or interest, or when a loan becomes impaired and
circumstances raise serious doubt as to collectibility of all principal and
interest, and collateral coverage is inadequate to cover the credit, whichever
event occurs first. When a loan is placed on non-accrual status, previously
recognized but uncollected interest is reversed to income or charged to the
allowance for loan losses. If the underlying collateral value is sufficient to
cover the principal balance and accrued interest, the Bank may decide to
continue the accrual of interest.
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is an amount which in management's judgment is
adequate to absorb potential losses in the loan portfolio. The allowance for
loan losses is based upon management's review and evaluation of the loan
portfolio. Factors considered in the establishment of the allowance for loan
losses include management's evaluation of specific loans; the level and
composition of classified loans; historical loss experience; results of
examinations by regulatory agencies; an internal asset review process;
expectations of future economic conditions and their impact on particular
borrowers; and other judgmental factors.
<PAGE> 57
The allowance for loan losses is based on estimates of potential future losses,
and ultimate losses may vary from the current estimates. These estimates are
reviewed periodically and as adjustments become necessary, the effect of the
change in estimate is charged to operating expenses in the period incurred.
All losses are charged to the allowance for loan losses when the loss actually
occurs or when management believes that the collectibility of the principal is
unlikely. Recoveries are credited to the allowance at the time of recovery.
BANK PREMISES AND EQUIPMENT
Bank premises and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided at rates based upon estimated useful service lives
using the straight-line method for financial reporting purposes and accelerated
methods for tax reporting purposes.
The costs of assets retired or otherwise disposed of and the related
accumulated depreciation are eliminated from the accounts in the year of
disposal, and the resulting gains or losses are included in current operations.
Expenditures for maintenance and repairs are charged to operations as incurred.
Costs of major additions and improvements are capitalized.
OTHER REAL ESTATE
Other real estate is comprised of properties acquired through foreclosure or
negotiated settlement. The carrying value of these properties is the lower of
cost or fair market value. Loan losses arising from the acquisition of these
properties are charged against the allowance for loan losses. Any subsequent
market reductions required are charged to other real estate expense. Revenues
and expenses associated with maintaining or disposing of foreclosed properties
are recorded during the period in which they are incurred.
INCOME TAXES
The Company and its subsidiary file a consolidated federal income tax return.
In addition, state income tax returns are filed individually by the company in
accordance with state statutes.
The provision for income taxes includes deferred taxes due to the accounting of
certain items of income and expense in different years for financial and
federal income tax purposes. The differences relate principally to provision
for loss on other real estate, depreciation of bank premises and equipment and
provision for loan losses. Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating losses and tax credit carryforwards and deferred tax liabilities
are recognized for taxable temporary differences. Temporary differences are
the differences between the reported amounts of assets and liabilities and
their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Deferred tax
assets and liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
EARNINGS PER COMMON SHARE
The earnings per common share is calculated based on the weighted average
shares of common stock and common stock equivalents outstanding during the
year. Common stock equivalents included in the computations represent the
dilutive effect of shares issuable under stock options granted by the Company.
For purposes of this calculation, net income is adjusted for the current year's
8% cumulative dividend paid to the preferred stockholders. The weighted
average number of common shares outstanding during the years 1996, 1995 and
1994 were 523,997 shares, 502,200 shares, and 488,000 shares, respectively.
These items have been retroactively restated for 1995 and 1994 as discussed in
Note I.
STATEMENTS OF CASH FLOWS
For purposes of reporting cash flows, cash and due from banks include cash on
hand and amounts due from banks (including cash items in process of clearing).
CURRENT ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board issued Statement No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities." This statement becomes effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December
31, 1996. The statement generally requires that after a transfer of financial
assets, an entity would recognize all financial assets and servicing it
controls and liabilities it has incurred, and would not recognize financial
assets when control has been surrendered or liabilities when they have been
extinguished. The Bank has addressed the potential future impact of the
application of this statement and considers it to be immaterial.
<PAGE> 58
================================================================================
NOTE B
CASH AND DUE FROM BANKS
The Bank is required to maintain average cash reserve balances. The amounts of
those reserves at December 31, 1996 and 1995, were approximately $148,000 and
$317,000, respectively.
================================================================================
NOTE C
SECURITIES
Amortized cost and fair values of securities being held to maturity as of
December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities of
Other U.S.
Government
Agencies $5,615,451 $ 0 $ 61,511 $5,553,940
Mortgage-
Backed
Securities 262,544 5,736 0 268,280
Obligations of
State and
Political
Subdivisions 312,638 127 0 312,765
---------- ---------- ---------- ----------
Totals $6,190,633 $ 5,863 $ 61,511 $6,134,985
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1995
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Securities of
Other U.S.
Government
Agencies $3,870,801 $ 8,844 $ 56,908 $3,822,737
Mortgage-
Backed
Securities 345,550 3,612 0 349,162
Obligations of
State and
Political
Subdivisions 315,681 1,454 556 316,579
---------- ---------- ---------- ----------
Totals $4,532,032 $ 13,910 $ 57,464 $4,488,478
========== ========== ========== ==========
</TABLE>
The amortized cost and fair value of securities being held to maturity at
December 31, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---------- ----------
<S> <C> <C> <C>
Due in 1 Year or Less $ 0 $ 0
Due After 1 Year Through 5 Years 3,093,349 3,051,445
Due After 5 Years Through 10 Years 2,834,740 2,815,260
Due After 10 years 0 0
---------- ----------
$5,928,089 $5,866,705
Mortgage-Backed Securities 262,544 268,280
---------- ----------
$6,190,633 $6,134,985
========== ==========
</TABLE>
Securities being held to maturity with a carrying amount of $2,750,000 and $0
at December 1996 and 1995, respectively, were pledged as collateral on public
deposits and for other purposes as required or permitted by law.
Amortized cost and fair values of securities available for sale as of December
31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasury
Securities $2,021,744 $ 0 $ 16,199 $2,005,545
Securities of
Other U.S.
Government
Agencies 6,318,837 0 60,683 6,258,154
Obligations of
State and
Political
Subdivisions 100,000 0 2,865 97,135
Other
Securities 258,711 0 0 258,711
---------- ---------- ---------- ----------
Totals $8,699,292 $ 0 $ 79,747 $8,619,545
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1995
----------------------------------------------------
GROSS UNREALIZED
AMORTIZED ------------------------ FAIR
COST GAINS LOSSES VALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
U.S. Treasury
Securities $ 3,098,798 $ 18,563 $ 11,980 $ 3,105,381
Securities of
Other U.S.
Government
Agencies 7,346,031 51,239 15,129 7,382,141
Other
Securities 258,713 0 0 258,713
----------- ----------- ----------- -----------
Totals $10,703,542 $ 69,802 $ 27,109 $10,746,235
=========== =========== =========== ===========
</TABLE>
The amortized cost and fair value of securities available for sale as of
December 31, 1996 by contractual maturities are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<PAGE> 59
<TABLE>
AMORTIZED FAIR
COST VALUE
---------- ----------
<S> <C> <C>
Due in 1 Year or Less $ 999,281 $1,003,905
Due After 1 Year Through 5 Years 4,789,065 4,734,008
Due After 5 Years Through 10 Years 2,552,235 2,525,786
Due After 10 years 100,000 97,135
---------- ----------
$8,440,581 $8,360,834
Other Securities 258,711 258,711
---------- ----------
$8,699,292 $8,619,545
========== ==========
</TABLE>
The Bank has invested in Federal Home Loan Bank stock which is included in
Other Securities and is reflected at the lower of cost or market in these
financial statements. The cost of these securities was $233,400.
Gross realized gains and losses from the sale of securities for the years ended
December 31, 1996, 1995, and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Realized Gains $ 0 $ 0 $ 0
Realized Losses 5,637 14,582 206,600
</TABLE>
Securities available for sale with a carrying amount of $250,000 and $2,700,000
at December 1996 and 1995, respectively, were pledged as collateral on public
deposits and for other purposes as required or permitted by law.
================================================================================
NOTE D
LOANS
An analysis of the loan portfolio at December 31, 1996 and 1995, is as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Real Estate $ 22,527,416 $ 16,982,659
Commercial and Industrial Loans 16,863,534 17,082,822
Loans to Individuals 3,271,360 3,973,608
------------ ------------
Total Loans $ 42,662,310 $ 38,039,089
Allowance for Loan Losses (645,191) (550,869)
$ 42,017,119 $ 37,488,220
============ ============
</TABLE>
Most of the Company's business activity is with customers located in East Baton
Rouge Parish and the surrounding area. As of December 31, 1996 and 1995, there
was only one significant loan to a borrower located and conducting business
outside the Company's geographic area. This loan amounted to $1,018,622 and
$1,059,667 at December 31, 1996 and 1995.
During 1996, the Company purchased two significant participations from a
correspondent bank in which the borrower was located and conducting business
outside the Company's geographic area. At December 31, 1996, the amount of
participation outstanding on these two loans were $820,913.
As of December 31, 1996 and 1995, the Bank has extended 64 and 56 lines of
credit, respectively, to individuals, their companies, and/or other related
parties, in excess of $200,000. These lines comprise 65% and 54%,
respectively, of total loans.
The Bank had nonperforming loans on nonaccrual status totaling $199,202 and
$22,793 at December 31, 1996 and 1995. The Bank recognized $11,007, $918 and
$0 in interest income relating to these loans during the years ended December
31, 1996, 1995 and 1994. Had the loans been performing, approximately $9,572,
$2,067 and $0 of additional interest income would have been recognized for the
years ended December 31, 1996, 1995 and 1994. Loans contractually past due 90
days or more, in addition to loans on nonaccrual, were $0 at December 31, 1996
and 1995.
Furthermore, as of December 31, 1996, the Bank has no loans considered to be
impaired under the meaning of Financial Accounting Standards Board Statement
No. 114.
The Bank is permitted to make extensions of credit to its executive officers
and directors and their affiliates in the ordinary course of business. The
loans and other transactions are made on substantially the same terms as those
prevailing at the time for comparable loans and similar transactions with other
parties. The amount of such related party loans was $537,666 and $728,813 at
December 31, 1996 and 1995, respectively. An analysis of the aggregate of
these loans for 1996 is as follows:
<TABLE>
<S> <C>
Balance - Beginning of Year $728,813
New Loans 74,566
Repayments 265,713
--------
Balance - End of Year $537,666
========
</TABLE>
================================================================================
NOTE E
ALLOWANCE FOR LOAN LOSSES
Following is a summary of the activity in the allowance for loan losses:
<PAGE> 60
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance - Beginning of Year $ 550,869 $ 475,861 $ 474,678
Loans Charged Off $(289,215) $ (38,377) $ (29,034)
Recoveries 215,102 48,385 30,217
--------- --------- ---------
Net Loans Recovered
(Charged Off) $ (74,113) $ 10,008 $ 1,183
Additions to Allowance
Charged to Operating
Expense 168,435 65,000 0
--------- --------- ---------
Balance - End of Year $ 645,191 $ 550,869 $ 475,861
========= ========= =========
Ratio of Allowance for
Possible Loan Losses to
Non-Performing Loans
at End of Year 323.88% 2,416.83% N/A
========= ========= =========
Ratio of Allowance for
Possible Loan Losses to
Loans Outstanding at
End of Year 1.51% 1.45% 1.57%
========= ========= =========
Ratio of Net Loans Charged
Off to Average Loans
Outstanding for the Year .19% (.03)% (.01)%
========= ========= =========
</TABLE>
In 1996, one line of credit in excess of $100,000 was charged-off in the amount
of $158,775 which represented 55% of the total 1996 loans charged-off. During
1995 and 1994, no loans in excess of $100,000 were charged-off.
================================================================================
NOTE F
BANK PREMISES AND EQUIPMENT
Bank premises and equipment and the related accumulated depreciation at
December 31, 1996 and 1995, are as follows:
<TABLE>
ASSET ACCUMULATED
COST DEPRECIATION NET
---------- ------------ ----------
<S> <C> <C> <C>
December 31, 1996:
Land $ 732,862 $ 0 $ 732,862
Bank Premises 1,537,534 117,932 1,419,602
Furniture and
Equipment 675,646 365,565 310,081
Construction In
Progress 8,760 0 8,760
---------- ---------- ----------
$2,954,802 $ 483,497 $2,471,305
========== ========== ==========
</TABLE>
<TABLE>
ASSET ACCUMULATED
COST DEPRECIATION NET
------------ ------------ ------------
<S> <C> <C> <C>
December 31, 1995:
Land $ 732,862 $ 0 $ 732,862
Bank Premises 1,448,909 148,653 1,300,256
Furniture and
Equipment 559,528 311,281 248,247
Construction In
Progress 30,000 0 30,000
------------ ------------ ------------
$ 2,771,299 $ 459,934 $ 2,311,365
============ ============ ============
</TABLE>
Depreciation charged to operating expenses amounted to $96,798, $82,585 and
$49,988 for the years ended December 31, 1996, 1995 and 1994, respectively.
During 1996, the Lobdell branch office was demolished as management intends to
construct a new facility in this same location. The Lobdell branch office is
currently being operated from an on-site temporary modular bank building.
Construction of the new building is scheduled to begin in the Spring of 1997
with an estimated completion date of December 1997. The estimated cost of
construction is approximately $230,000. At December 31, 1996, $8,760 has been
expended for architect and engineering fees associated with the new facility.
At December 31, 1996, this amount is included in Construction Work in Progress.
================================================================================
NOTE G
DEPOSITS
Following is a detail of deposits as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Demand Deposit Accounts $13,368,393 $10,515,300
NOW and Super NOW Accounts 4,947,792 6,125,916
Insured Money Market Accounts 5,076,945 4,286,658
Savings Accounts 3,818,229 2,491,811
Certificates of Deposit over
$100,000 8,532,652 9,257,090
Other Certificates of Deposit 27,625,233 21,509,562
----------- -----------
$63,369,244 $54,186,337
=========== ===========
</TABLE>
Interest expense on Certificates of Deposit over $100,000 at December 31, 1996,
1995 and 1994, amounted to approximately $456,000, $447,000 and $268,000,
respectively.
Public fund deposits at December 31, 1996 and 1995, were $2,107,786 and
$2,168,000, respectively.
<PAGE> 61
================================================================================
NOTE H
EMPLOYEE STOCK OPTIONS
Pursuant to Board of Directors' action March 18, 1988, and amended by Board of
Directors' action on August 30, 1995, a total of 120,000 shares of common stock
have been reserved for issuance to employees who are granted stock options.
These options must be exercised within ten years from the date the options were
granted and full vesting occurs immediately upon grant date. The exercise
price for all of the options approximated the fair market value of the common
stock at the date the options were granted. The items listed below have been
retroactively restated as discussed in Note I for 1995 and 1994.
The following summary sets forth activity for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Shares Under Option
at Beginning of Year 96,700 85,400 86,800
Shares Under Option
Granted During Year 19,777 14,500 17,400
Shares Under Option
Exercised During Year (15,800) (0) (4,000)
Shares Under Option
Canceled During Year (12,900) (3,200) (14,800)
--------- --------- ---------
Shares Under Option
at End of Year 87,777 96,700 85,400
========= ========= =========
Price Range Per Share $ 5.50 to $ 5.50 to $ 5.50 to
$ 11.38 $ 10.66 $ 9.11
</TABLE>
================================================================================
The Company applies APB Opinion 25 and related interpretations in accounting
for its plan. Accordingly, no compensation cost has been recognized for its
plan. Under the provision of SFAS No. 123, "Accounting for Stock-Based
Compensation," compensation cost is recognized for the fair value of the
employees' purchase rights, which was estimated using the minimum value method
with the following assumptions for 1996, 1995 and 1994: (1) current dividend
rate remains constant for all years, (2) all options will be exercised prior to
expiration, and (3) risk free interest rates applicable for the expected term
of the options. Based on the foregoing assumptions, the weighted average fair
value of the stock options granted in 1996, 1995 and 1994 was $2.72, $1.09 and
$1.48 respectively. Had compensation cost for the Company's plan been
determined based on the fair value at the grant dates for awards under the plan
consistent with the method of FASB Statement 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Net Income
As reported $ 458,802 $ 646,858 $ 367,913
=========== =========== ===========
Pro forma $ 423,300 $ 640,000 $ 357,700
=========== =========== ===========
Earnings Per Share
As reported $ .85 $ 1.22 $ .68
=========== =========== ===========
Pro forma $ .78 $ 1.20 $ .66
=========== =========== ===========
</TABLE>
================================================================================
NOTE I
STOCKHOLDERS' EQUITY AND REGULATORY MATTERS
Dividends are paid by the Company from its assets which are provided primarily
by dividends from the Bank. However, certain restrictions exist regarding the
ability of the Bank to transfer funds to the Company in the form of cash
dividends, loans or advances. Regulatory approval is required to pay dividends
in excess of the Bank's earnings retained in the current year plus retained net
profits for the preceding year.
During 1996 and 1995, the Bank paid NBC Financial Corporation a dividend of
$75,000.
At December 31, 1996, the Bank has additional retained earnings of $957,086
available for distribution to the Company as dividends without prior regulatory
approval.
In May 1996, the Company adopted a resolution to convert all classes of
preferred stock to common stock. As a result of this transaction, 33,860
additional shares of common stock were issued and $415,064 was transfered to
surplus. The resolution also increased the number of common stock shares
authorized from 1,000,000 to 10,000,000.
Also, during the fiscal year ended December 31, 1996, the Company declared and
paid four quarterly cash dividends on the common stock which amounted to
$54,876. The Company also declared and paid a cash preferred dividend of
$12,676 prior to the conversion of preferred stock to common stock as discussed
in the preceding paragraph.
On May 26, 1995, the Company declared a 3 for 1 common stock split in the form
of a dividend. As a result of this transaction, $315,000 was transferred from
Retained Earnings to Common Stock. All earnings per
<PAGE> 62
share information presented has been retroactively restated to reflect this
change for 1995 and 1994.
The Bank is also required to maintain minimum amounts of capital to total risk
weighted assets, as required by banking regulators. At December 31, 1996, the
Bank is required to have minimum Tier 1 and Total Capital ratios of 4.00% and
8.00%, respectively. The Bank's actual ratios at that date were 11.47% and
12.72%, respectively. The Bank's Leverage Ratio at December 31, 1996, was
8.30%.
================================================================================
NOTE J
EMPLOYEE BENEFITS
The Bank adopted a Tax Deferred Employee Savings Plan in December 1991, with
the Plan's effective date being January 1, 1992. The Plan covers all employees
who qualify as to age and length of service. Past services at the effective
date of the Plan will be recognized for vesting purposes. Covered employees
may voluntarily contribute up to the lesser of (1) 20% of compensation or (2)
$9,500 for 1996 into the Plan. For the year 1996, matching contributions by the
Bank of 100% of voluntary contributions up to a maximum of 5% of gross pay were
made by the Bank. Full vesting of benefits is to occur at the end of a three
year period from employment date as follows:
<TABLE>
<S> <C>
After One Year 30% Vesting
After Two Years 60% Vesting
After Three Years 100% Vesting
</TABLE>
The Bank's matching contributions to the plan amounted to $22,513, $29,819 and
$27,094 for the years ended December 31, 1996, 1995 and 1994, respectively.
================================================================================
NOTE K
OTHER OPERATING EXPENSES
The analysis of other operating expenses for the years ended December 31, 1996,
1995 and 1994, is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Advertising and Public Relations $ 32,181 $ 55,950 $ 71,018
Data Processing 134,663 110,537 86,996
Equipment Expense 108,708 91,070 85,027
Other 533,050 492,115 420,632
-------- -------- --------
$808,602 $749,672 $663,673
======== ======== ========
</TABLE>
================================================================================
NOTE L
FEDERAL INCOME TAXES
The applicable income tax for financial reporting purposes historically differs
from the amount computed by applying the federal statutory tax rate of 34% to
income before income taxes due to increases and decreases in timing differences
and utilization of a prior net operating loss carryforward. The effective
income tax rate for the years ended December 31, 1996, 1995 and 1994 was 33%,
9.9% and 0.0% respectively.
At December 31, 1996, the Companies have, for tax purposes, completely utilized
prior net operating loss carryforward amounts.
Following is a reconciliation between income tax expense based on the federal
statutory tax rates and income taxes reported in the Statements of Income.
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Income Taxes Based on
Statutory Rates $ 233,000 $ 244,000 $ 98,944
Net Operating Loss
Carryforward (14,900) (258,900) (95,400)
Other - Net 8,518 86,200 (80,444)
--------- --------- --------
$ 226,618 $ 71,300 $(76,900)
========= ========= ========
Components of Provision for
Federal Income Taxes:
Provision for Current
Taxes $ 226,318 $ 0 $ 0
Provision for Deferred
Taxes 300 71,300 (76,900)
--------- --------- --------
$ 226,618 $ 71,300 $(76,900)
========= ========= ========
</TABLE>
The deferred tax asset included in other assets for the years ended December
31, 1996 and 1995 was $91,400 and $50,200 respectively.
The deferred tax provision (benefit) consists of the following timing
differences:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Depreciation Expense for Tax
Reporting in Excess of Amount for
Financial Reporting $ 13,900 $ 7,400 $ 7,800
Charitable Contributions for
Financial Reporting in Excess of
Amount for Tax Reporting 12,800 (12,800) 0
Provision for Loan Losses for
Financial Reporting in Excess of
Amount for Tax Reporting (56,700) (22,000) 0
Other Real Estate Write-offs for
Tax Reporting in Excess of Amount
for Financial Reporting 15,400 0 6,800
Utilization of Net Operating Loss
Carryforward 14,900 258,900 95,400
--------- --------- ---------
$ 300 $ 231,500 $ 110,000
Adjustment of Valuation Allowance 0 (160,200) (186,900)
--------- --------- ---------
Provision (Benefit) for Deferred
Taxes $ 300 $ 71,300 $ (76,900)
========= ========= =========
</TABLE>
<PAGE> 63
The net deferred tax asset consists of the following components at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Unrealized (Gains) Losses on
Securities Available for Sale $ 27,000 $ (14,500)
Charitable Contributions 0 12,800
Depreciation (44,300) (30,400)
Provision for Loan Losses 103,700 47,000
Other Real Estate 5,000 20,400
Net Operating Loss Carryforward 0 14,900
--------- ---------
Net Deferred Tax Assets $ 91,400 $ 50,200
========= =========
</TABLE>
================================================================================
NOTE M
OFF-BALANCE-SHEET INSTRUMENTS
In the normal course of business, the Bank is a party to financial instruments
which are not recorded in the consolidated financial statements. These
financial instruments include commitments to extend credit and letters of
credit.
Loan commitments and lines of credit represent commitments to lend funds at
specific rates, with fixed expiration or review dates and for specific
purposes. These commitments are agreements to fund loans if the conditions in
the agreements are met. Since many commitments are never actually drawn on,
the unfunded amounts do not necessarily represent future funding requirements.
The Bank evaluates each customer's credit worthiness on an individual basis.
The amount of collateral obtained, if any, upon extension of credit is based on
the credit worthiness of the customer.
Standby letters of credit obligate the Bank to pay third parties if the Bank's
customers fail to perform under the agreements with those third parties.
Letters of credit are subject to credit reviews, collateral requirements and
debt covenants similar to those in loan agreements. The credit risk involved
in issuing letters of credit is essentially the same as that involved in
extending loans to customers.
There are no financial instruments which present an unusual risk to the Bank,
and no material losses are anticipated as a result of these transactions.
A summary of obligations under financial instruments which are not reflected in
the consolidated financial statements is as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Commitments to Extend Credit for Loans $7,513,554 $4,860,800
Standby Letters of Credit 305,000 205,000
---------- ----------
$7,818,554 $5,065,800
========== ==========
</TABLE>
================================================================================
NOTE N
CONCENTRATIONS OF CREDIT
Most of the Bank's business activities are with customers in the Bank's market
area, which consists primarily of East Baton Rouge and adjacent parishes. The
majority of such customers are depositors of the Bank. The concentrations of
credit by type of loan are shown in Note D. Most of the Bank's credits are to
small businesses and individuals secured by real estate. The Bank, as a matter
of policy, does not extend credit to any single borrower or group of related
borrowers in excess of legal lending limits.
================================================================================
NOTE O
SHORT TERM BORROWINGS
The Bank maintains an open line of credit with the Federal Home Loan Bank of
Dallas to assist in maintaining short-term liquidity. The total line of credit
available with the Federal Home Loan Bank of Dallas at December 31, 1996
amounts to approximately $1,175,000. The agreement provides for interest based
upon the federal funds rate on outstanding balances and is secured by a blanket
lien on family mortgage loans. This line of credit was unfunded as of December
31, 1996 and 1995.
Furthermore, the bank has obtained additional unsecured Federal Funds lines of
credit with other correspondent banks. These lines of credit were unfunded as
of December 31, 1996 and 1995.
================================================================================
NOTE P
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
<PAGE> 64
CASH AND SHORT-TERM INVESTMENTS - For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
SECURITIES - Fair value of securities held to maturity and available for sale
is based on quoted market prices or dealer quotes. If a quoted market price is
not available, fair value is estimated using quoted market prices for similar
securities.
LOANS - The fair value for loans is estimated using discounted cash flow
analyses, with interest rates currently being offered for similar loans to
borrowers with similar credit rates. Loans with similar classifications are
aggregated for purposes of the calculations. The allowance for loan loss,
which was used to measure the credit risk, is subtracted from loans.
DEPOSITS - The fair value of demand deposits, savings accounts, and certain
money market deposits is the amount payable on demand at the reporting date.
The fair value of fixed maturity certificates of deposit is estimated using
discounted cash flow analyses, with interest rates currently offered for
deposits of similar remaining maturities.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT - The fair value of
commitments to extend credit and standby letters of credit were not
significant.
The estimated approximate fair values of the Bank's financial instruments as of
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996
-------------------------
CARRYING FAIR
VALUE VALUE
----------- -----------
<S> <C> <C>
Financial Asset:
Cash and Short-Term Investments $ 8,993,603 $ 8,993,603
Securities 14,810,178 14,754,530
Loans - Net 42,017,119 41,869,000
----------- -----------
$65,820,900 $65,617,133
=========== ===========
Financial Liabilities:
Deposits $63,369,244 $63,859,000
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
1995
-------------------------
CARRYING FAIR
VALUE VALUE
----------- -----------
<S> <C> <C>
Financial Asset:
Cash and Short-Term Investments $ 3,486,033 $ 3,486,033
Securities 15,278,267 15,234,713
Loans - Net 37,488,220 37,446,000
----------- -----------
$56,252,520 $56,166,746
=========== ===========
Financial Liabilities:
Deposits $54,186,337 $54,528,000
=========== ===========
</TABLE>
================================================================================
NOTE Q
CONTINGENCIES AND LITIGATION
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management and counsel, any liability resulting
from such proceedings would not have a material adverse effect on the Company's
financial statements.
<PAGE> 65
================================================================================
NOTE R
PARENT COMPANY FINANCIAL STATEMENTS
The financial statements for NBC Financial Corporation (Parent Company Only)
are presented below:
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Assets:
Cash $ 159,889 $ 49,452
Investment in Subsidiary:
Bank of Commerce 5,339,358 5,035,972
----------- -----------
TOTAL ASSETS $ 5,499,247 $ 5,085,424
=========== ===========
Liabilities:
TOTAL LIABILITIES $ 0 $ 0
Stockholders' Equity:
Preferred Stock $ 0 $ 455,475
Common Stock 469,660 420,000
Surplus 5,441,964 4,932,750
Retained Earnings (Deficit) (412,377) (722,801)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 5,499,247 $ 5,085,424
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,499,247 $ 5,085,424
=========== ===========
</TABLE>
<PAGE> 66
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Income:
Dividend Income $ 75,000 $ 75,000 $ 75,000
-------- -------- --------
$ 75,000 $ 75,000 $ 75,000
Expenses:
Operating Expenses 411 1,015 527
-------- -------- --------
Income (Loss) before Equity in
Undistributed Net Income of Subsidiary $ 74,589 $ 73,985 $ 74,473
Equity in Undistributed Net
Income of Subsidiary 384,213 572,873 317,439
-------- -------- --------
NET INCOME $458,802 $646,858 $391,912
======== ======== ========
</TABLE>
<PAGE> 67
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 458,802 $ 646,858 $ 391,912
Adjustments to Reconcile Net Income to
Net Cash Provided by (Used in)
Operating Activities:
Equity in Undistributed Net Income
of Subsidiary (384,213) (572,873) (317,439)
Increase (Decrease) in Accrued Interest
Payable and Other Liabilities 0 (46,924) (44,918)
--------- --------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 74,589 $ 27,061 $ 29,555
Cash Flows From Financing Activities:
Net Proceeds from Issuance of Common Stock $ 109,950 $ 0 $ 25,000
Redemption of Preferred Stock (6,250) 0 0
Payment of Fractional Shares of
Preferred Stock (301) 0 0
Cash Dividends (67,551) (86,851) (46,027)
--------- --------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES $ 35,848 $ (86,851) $ (21,027)
--------- --------- ---------
INCREASE (DECREASE) IN CASH $ 110,437 $ (59,790) $ 8,528
CASH - BEGINNING OF YEAR 49,452 109,242 100,714
--------- --------- ---------
CASH - END OF YEAR $ 159,889 $ 49,452 $ 109,242
========= ========= =========
Supplemental Disclosures of Cash
Flow Information:
Transfer from Retained Earnings
Due To Stock Split in the Form of a
Dividend $ 0 $ 315,000 $ 0
========= ========= =========
Transaction Resulting From Conversion of
Preferred Stock to Common Stock:
Common Stock $ 33,860 $ 0 $ 0
Surplus 415,064 0 0
--------- --------- ---------
$ 448,924 $ 0 $ 0
========= ========= =========
</TABLE>
<PAGE> 68
================================================================================
NOTE S
FINANCIAL STATEMENTS OF WHOLLY OWNED BANK SUBSIDIARY
The financial statements for Bank of Commerce, a wholly owned subsidiary of NBC
Financial Corporation, are presented below:
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Assets:
Cash and Due from Banks $ 3,693,603 $ 2,886,033
Securities Held to Maturity 11,490,633 5,132,032
Securities Available for Sale 8,619,545 10,746,235
Loans 42,017,119 37,488,220
Bank Premises and Equipment 2,471,305 2,311,365
Other Assets 996,920 895,630
------------ ------------
TOTAL ASSETS $ 69,289,125 $ 59,459,515
============ ============
Liabilities:
Deposits $ 63,529,133 $ 54,235,789
Other Liabilities 420,633 187,754
------------ ------------
TOTAL LIABILITIES $ 63,949,766 $ 54,423,543
Stockholders' Equity:
Common Stock $ 2,500,000 $ 2,500,000
Surplus 1,250,000 1,250,000
Retained Earnings 1,641,993 1,257,780
Unrealized Gain (Loss) on Securities
Available for Sale (52,634) 28,192
------------ ------------
TOTAL STOCKHOLDERS' EQUITY $ 5,339,359 $ 5,035,972
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 69,289,125 $ 59,459,515
============ ============
</TABLE>
<PAGE> 69
CONDENSED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Interest Income $ 4,896,036 $ 4,427,024 $ 3,196,354
Interest Expense 2,375,608 2,033,048 1,215,297
----------- ----------- -----------
Net Interest Income $ 2,520,428 $ 2,393,976 $ 1,981,057
Provision (Credit) for Loan Losses 168,435 65,000 0
----------- ----------- -----------
Net Interest Income after
Provision (Credit) for
Loan Losses $ 2,351,993 $ 2,328,976 $ 1,981,057
Gain (Loss) on Securities (5,637) (14,582) (206,600)
Net Other Real Estate Income 85,961 46,192 34,027
Other Operating Income 240,897 201,660 124,409
----------- ----------- -----------
Income Before Other Expenses $ 2,673,214 $ 2,562,246 $ 1,932,893
Other Expenses 1,987,383 1,843,073 1,617,353
----------- ----------- -----------
Income before Income Taxes $ 685,831 $ 719,173 $ 315,540
Applicable Income Taxes (Provision) Benefit (226,618) (71,300) 76,900
----------- ----------- -----------
NET INCOME $ 459,213 $ 647,873 $ 392,440
=========== =========== ===========
</TABLE>
<PAGE> 70
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 459,213 $ 647,873 $ 392,440
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Depreciation 96,798 82,585 49,988
Provision for Loan Losses 168,435 65,000 0
Provision (Credit) for Deferred Taxes 300 71,300 (76,900)
Amortization (Accretion) of Premiums
(Discounts) on Securities 4,862 (80,695) 88,107
(Gain) Loss on Sale of Fixed Assets (2,927) 0 0
(Gain) Loss on Sale of Securities 5,637 14,582 206,600
(Gain) Loss on Sale of Other Real
Estate 0 0 (14,080)
(Increase) Decrease in Accrued Interest
Receivable and Other Assets (59,790) (120,399) (38,098)
Increase (Decrease) in Accrued
Interest Payable and Other Liabilities 232,879 56,867 28,013
----------- ----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 905,407 $ 737,113 $ 636,070
Cash Flows From Investing Activities:
Net (Increase) Decrease in Federal Funds
Sold $(4,700,000) $ 200,000 $ 50,000
Proceeds from Sales of Securities 1,592,046 490,313 5,015,702
Proceeds from Maturities of Securities 4,307,000 5,650,000 2,000,000
Proceeds from Return of Principal on Certain
Mortgage-Backed Securities 71,178 109,121 469,809
Purchases of Securities (5,635,078) (8,145,282) (6,262,754)
Net (Increase) Decrease in Loans (4,697,334) (7,644,073) (6,290,462)
Purchases of Bank Premises and Equipment (261,394) (224,142) (1,301,239)
Proceeds from Sale of Fixed Assets 7,400 0 0
Proceeds from Sales of Other Real Estate 0 0 14,080
----------- ----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES $(9,316,182) $(9,564,063) $(6,304,864)
</TABLE>
(continued)
<PAGE> 71
CONDENSED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Financing Activities:
Net Increase (Decrease) in Deposits $ 9,293,345 $ 10,905,195 $ 5,104,622
Net Increase (Decrease) in Borrowed Funds 0 (900,000) 900,000
Dividend Paid to NBC Financial Corporation (75,000) (75,000) (75,000)
------------ ------------ ------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES $ 9,218,345 $ 9,930,195 $ 5,929,622
------------ ------------ ------------
INCREASE IN CASH AND DUE FROM BANKS $ 807,570 $ 1,103,245 $ 260,828
CASH AND DUE FROM BANKS -
BEGINNING OF YEAR 2,886,033 1,782,788 1,521,960
------------ ------------ ------------
CASH AND DUE FROM BANKS -
END OF YEAR $ 3,693,603 $ 2,886,033 $ 1,782,788
============ ============ ============
Supplemental Disclosures of Cash
Flow Information:
Cash Payments for:
Interest Paid to Depositors $ 2,332,656 $ 1,946,696 $ 1,173,214
============ ============ ============
Interest Paid on Borrowed Funds $ 16,376 $ 10,767 $ 25,559
============ ============ ============
Income Tax Payments (Refunds) $ 15,788 $ 0 $ 0
============ ============ ============
Supplemental Schedule of Noncash
Investing and Financing Activities:
Change in Unrealized Gain (Loss) on
Securities Available for Sale $ (122,440) $ 366,322 $ (319,822)
============ ============ ============
Change in the Deferred Tax Effect on
Unrealized Gain (Loss) on Securities
Available for Sale $ 41,500 $ (14,500) $ 0
============ ============ ============
</TABLE>
<PAGE> 72
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DEPOSIT GUARANTY CORP.,
DEPOSIT GUARANTY NATIONAL BANK OF LOUISIANA,
NBC FINANCIAL CORPORATION
AND
BANK OF COMMERCE
<PAGE> 73
Table of Contents
<TABLE>
<S> <C>
Article I. THE HOLDING COMPANY MERGER ................................... 1
1.01 Holding Company Merger. ............................. 1
1.02 Effective Date of the Holding Company Merger. ....... 1
1.03 Effect of the Holding Company Merger. ............... 1
1.04 Additional Actions. ................................. 1
1.05 Conversion of NBC Financial Corporation Shares. ..... 1
1.06 Exchange of Shares. ................................. 2
1.07 Tax Consequences. ................................... 2
Article II. THE BANK MERGER .............................................. 3
2.01 The Bank Merger. .................................... 3
2.02 Effective Date. ..................................... 3
2.03 Cancellation of Capital Stock of Bank of Commerce. .. 3
2.04 Capital Structure of the Receiving Association. ..... 3
2.05 Effects of the Bank Merger. ......................... 3
2.06 Tax Consequences. ................................... 4
Article III. REPRESENTATIONS AND WARRANTIES OF
BANK OF COMMERCE AND NBC FINANCIAL CORPORATION ............... 4
3.01 Corporate Organization. ............................. 4
3.02 Capitalization. ..................................... 4
3.03 Investments; No Subsidiaries. ....................... 4
3.04 Loan Portfolio. ..................................... 5
3.05 Authority; No Violation. ............................ 5
3.06 Consents and Approvals. ............................. 5
3.07 Financial Statements. ............................... 5
3.08 No Broker's Fees. ................................... 5
3.09 Title to Properties; Encumbrances. .................. 5
3.10 No Undisclosed Liabilities. ......................... 6
3.11 Absence of Certain Changes or Events. ............... 6
3.12 Leases. ............................................. 7
3.13 Trademarks; Trade Names. ............................ 7
3.14 Compliance with Applicable Law. ..................... 8
3.15 Absence of Questionable Payments. ................... 8
3.16 Insurance. .......................................... 8
3.17 Powers of Attorney; Guarantees. ..................... 8
3.18 Tax Matters ......................................... 8
3.19 Benefit and Employee Matters. ....................... 9
3.20 Contracts and Commitments; No Default ............... 10
3.21 Disclosure. ......................................... 11
3.22 Litigation. ......................................... 11
3.23 Environmental Matters. .............................. 11
3.24 Contract Termination Provisions ..................... 12
Article IV. REPRESENTATIONS AND WARRANTIES OF DGC
AND DGNB LOUISIANA ........................................... 12
4.01 Corporate Organization. ............................. 12
4.02 Capitalization. ..................................... 12
4.03 Authority; No Violation. ............................ 13
4.04 Consents and Approvals. ............................. 13
</TABLE>
i
<PAGE> 74
<TABLE>
<S> <C> <C>
4.05 Legality of DGC Common Stock ......................... 13
4.06 SEC Documents; Financial Statements .................. 13
4.07 Litigation ........................................... 14
4.08 Statements are True and Correct ...................... 14
4.09 No Shareholder Vote .................................. 14
4.10 Broker's and Finder's Fee ............................ 14
4.11 Disclosure ........................................... 14
Article V. COVENANTS OF THE PARTIES ...................................... 14
5.01 Conduct of Business .................................. 14
5.02 Limitation on Actions ................................ 15
5.03 Current Information .................................. 15
5.04 Access to Properties and Records; Confidentiality .... 16
5.05 Interim Financial Statements ......................... 16
5.06 Regulatory Matters ................................... 16
5.07 Approval of Shareholders ............................. 17
5.08 Compliance with SEC Rules 144 and 145 ................ 17
5.09 Further Assurances. .................................. 17
5.10 Public Announcements ................................. 17
5.11 Benefits. ............................................ 18
5.12 Indemnification ...................................... 18
5.13 Post-Merger Financial Information .................... 18
5.14 Listing Application .................................. 18
Article VI. CLOSING CONDITIONS............................................. 19
6.01 Conditions to Each Party's Obligations under
this Agreement ....................................... 19
6.02 Conditions to the Obligations of DGC and DGNB
Louisiana under this Agreement ....................... 19
6.03 Conditions to the Obligations of Bank of Commerce and
NBC Financial Corporation under this Agreement ....... 21
Article VII. CLOSING........................................................ 23
7.01 Time and Place ....................................... 23
7.02 Deliveries at the Closing ............................ 23
Article VIII. TERMINATION ................................................... 23
8.01 Termination .......................................... 23
8.02 Effect of Termination ................................ 23
Article IX. MISCELLANEOUS ................................................. 24
9.01 Expenses ............................................. 24
9.02 Notices .............................................. 24
9.03 Parties in Interest .................................. 24
9.04 Amendment, Extension and Waiver ...................... 25
9.05 Complete Agreement ................................... 25
9.06 Non-Survival of Representations and Warranties ....... 25
9.07 Counterparts ......................................... 25
9.08 Governing Law ........................................ 25
9.09 Headings ............................................. 25
</TABLE>
ii
<PAGE> 75
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of February 20,
1997, by and among NBC Financial Corporation ("NBC"), a corporation organized
under the laws of the State of Louisiana, and its wholly-owned subsidiary Bank
of Commerce (the "Bank"), a state banking association organized under the laws
of Louisiana, and Deposit Guaranty Corp. ("DGC"), a corporation organized under
the laws of the State of Mississippi, and DGC's wholly-owned subsidiary Deposit
Guaranty National Bank of Louisiana ("DGNB Louisiana"), a banking association
organized under the laws of the United States, each acting pursuant to a
resolution of its Board of Directors.
In consideration of the mutual covenants, representations,
warranties and agreements herein contained, the parties agree that NBC shall be
merged into DGC (the "Holding Company Merger") on the terms and subject to the
conditions set forth in this Agreement and immediately following the Holding
Company Merger, the Bank shall be merged into DGNB Louisiana (the "Bank Merger"
and together with the Holding Company Merger, the "Mergers"), on the terms and
subject to the conditions set forth in this Agreement.
Article I.
THE HOLDING COMPANY MERGER
1.01 Holding Company Merger. In accordance with the applicable
provisions of the Louisiana Business Corporation Law ("LBCL") and the
Mississippi Business Corporation Act ("MBCA"), NBC shall be merged with and
into DGC; the separate existence of NBC shall cease, and DGC shall be the
corporation surviving the Holding Company Merger.
1.02 Effective Date of the Holding Company Merger. The Holding
Company Merger shall become effective on the date (the "Effective Date") set
forth in the certificate of merger and articles of merger filed in the offices
of the Secretaries of State of Louisiana and Mississippi, respectively.
1.03 Effect of the Holding Company Merger. On the Effective
Date, (i) the separate existence of NBC shall cease and NBC shall be merged
with and into DGC, (ii) DGC shall continue to possess all of the rights,
privileges and franchises possessed by it and shall, on the Effective Date,
become vested with and possess all rights, privileges and franchises possessed
by NBC, (iii) DGC shall be responsible for all of the liabilities and
obligations of NBC in the same manner as if DGC had itself incurred such
liabilities or obligations, and the Holding Company Merger shall not affect or
impair the rights of the creditors or of any persons dealing with NBC, (iv) the
Holding Company Merger will not of itself cause a change, alteration or
amendment to the Articles of Incorporation or the Bylaws of DGC, (v) the
Holding Company Merger will not of itself affect the tenure in office of any
officer or director of DGC and no such person will succeed to such positions
solely by virtue of the Holding Company Merger, and (vi) the Holding Company
Merger shall, from and after the Effective Date, have all the effects provided
by applicable Mississippi and Louisiana law.
1.04 Additional Actions. If, at any time after the Effective
Date, DGC shall consider or be advised that any further assignments or
assurances in law or any other acts are necessary or desirable (i) to vest,
perfect or confirm, of record or otherwise, in DGC, title to or the possession
of any property or right of NBC acquired or to be acquired by reason of, or as
a result of, the Holding Company Merger, or (ii) otherwise to carry out the
purposes of this Agreement, NBC and its proper officers and directors shall be
deemed to have granted to DGC an irrevocable power of attorney to execute and
deliver all such proper deeds, assignments and assurances in law and to do all
acts necessary or proper to vest, perfect or confirm title to and possession of
such property or rights in DGC and otherwise to carry out the purposes of this
Agreement; and the proper officers and directors of DGC are fully authorized in
the name of NBC to take any and all such action.
1.05 Conversion of NBC Financial Corporation Shares. Each share
of common stock, $1.00 par value, of NBC (the "NBC Common Stock") issued and
outstanding immediately prior to the Effective Date other than shares of NBC
Common Stock owned by stockholders who, pursuant to the LBCL, perfect
dissenters' rights ("Dissenting Shares"),
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<PAGE> 76
shall, by virtue of this Agreement and without any action on the part of the
holder thereof, be converted into and exchangeable for the number of shares of
common stock, no par value, of DGC (the "DGC Common Stock") equal to the
Exchange Ratio, as defined below, subject to adjustment as provided herein and,
in respect of fractional shares, subject to Section 1.06 hereof. The Exchange
Ratio shall equal 422,581 divided by the number of shares of NBC Common Stock
outstanding on the date immediately preceding the Effective Date. If prior to
the Effective Date DGC should split or combine DGC Common Stock, or pay a
dividend or other distribution in DGC Common Stock, then the exchange ratio
shall be appropriately adjusted to reflect such split, combination, dividend or
distribution.
1.06 Exchange of Shares. (a) As soon as practicable after the
Effective Date, Deposit Guaranty National Bank, acting as exchange agent (the
"Exchange Agent"), shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Date represented issued
and outstanding shares of NBC Common Stock (the "Certificates"), a form letter
of transmittal (which shall specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing DGC
Common Stock. Upon surrender of a Certificate for exchange and cancellation to
the Exchange Agent, together with such letter of transmittal, duly executed,
the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of shares of DGC Common Stock
to which such holder of NBC Common Stock shall have become entitled pursuant to
the provisions hereof, and the Certificate so surrendered shall forthwith be
canceled. Lost Certificates shall be treated in accordance with the existing
procedures of NBC.
(b) No dividends or other distributions declared after the
Effective Date with respect to DGC Common Stock and payable to the holders of
record thereof after the Effective Date shall be paid to the holder of any
unsurrendered Certificate until the holder thereof shall surrender such
Certificate. Subject to the effect, if any, of applicable law, after the
subsequent surrender and exchange of a Certificate, the record holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which theretofore had become payable with respect to the
shares of DGC Common Stock into which the shares represented by such
certificate have been converted.
(c) If any certificate representing shares of DGC Common Stock
is to be issued in a name other than that in which the Certificate surrendered
in exchange therefor is registered, it shall be a condition of the issuance
thereof that the Certificate so surrendered shall be properly endorsed (or
accompanied by an appropriate instrument of transfer) and otherwise in proper
form for transfer, and that the person requesting such exchange shall pay to
the Exchange Agent in advance any transfer or other taxes required by reason of
the issuance of a certificate representing shares of DGC Common Stock in any
name other than that of the registered holder of the Certificate surrendered,
or required for any other reason, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Date there shall be no transfers on the
stock transfer books of NBC of the shares of NBC Common Stock which are
outstanding immediately prior to the Effective Date. If, after the Effective
Date, Certificates representing such shares are presented for transfer to the
Exchange Agent, they shall be canceled and exchanged for certificates
representing shares of DGC Common Stock as provided herein.
(e) No certificates or scrip representing fractional shares of
DGC Common Stock shall be issued upon the surrender for exchange of such
Certificates, no dividend or distribution with respect to DGC Common Stock
shall be payable on or with respect to any fractional share, and such
fractional share interests shall not entitle the owner thereof to vote or to
any other rights of a shareholder of DGC. In lieu of any such fractional share,
DGC shall pay to each former stockholder of NBC who otherwise would be entitled
to receive a fractional share of DGC Common Stock an amount in cash determined
by multiplying (i) the closing price of DGC Common Stock on the New York Stock
Exchange on the trading day preceding the Effective Date, by (ii) the fraction
of a share of DGC Common Stock to which such holder would otherwise be
entitled.
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<PAGE> 77
1.07 Tax Consequences. It is intended that the Holding Company
Merger shall constitute a reorganization within the meaning of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code"), and
that this Agreement shall constitute a "plan of reorganization" within the
meaning of Section 368 of the Code.
Article II.
THE BANK MERGER
2.01 The Bank Merger. On the Effective Date (as defined in
Section 2.02 hereof), immediately following the Holding Company Merger, DGC
shall contribute the stock of the Bank to its wholly-owned subsidiary, Deposit
Guaranty Louisiana Corp., and the Bank shall then be merged with and into DGNB
Louisiana under the Articles of Association of DGNB Louisiana, as amended,
existing under Charter No. 13648, pursuant to the provisions of, and with the
effect provided in, 12 U.S.C. ss. 215a and La. R.S. 6:351 et seq. On the
Effective Date, DGNB Louisiana, the Receiving Association, shall continue to be
a national banking association, and its business shall continue to be conducted
at its main office in Hammond, Louisiana, and at its legally established
branches (including, without limitation, the legally established offices from
which Bank conducted business immediately prior to the Effective Date). The
Articles of Association of DGNB Louisiana shall not be altered or amended by
virtue of the Bank Merger, and the incumbency of the directors and officers of
DGNB Louisiana shall not be affected by the Bank Merger nor shall any person
succeed to such positions by virtue of the Bank Merger. DGNB Louisiana shall
file this Agreement with the Louisiana Commissioner of Financial Institutions
(the "Commissioner") pursuant to La. R.S. 6:352 and make appropriate filings
with the Office of the Comptroller of the Currency (the "OCC"). Bank and DGNB
Louisiana are sometimes referred to together as the "Merging Associations."
2.02 Effective Date. The Bank Merger shall become effective on
the Effective Date.
2.03 Cancellation of Capital Stock of Bank of Commerce. On the
Effective Date, by virtue of the Bank Merger, all shares of the capital stock
of Bank shall be canceled and no cash, securities or other property shall be
issued in the Bank Merger in respect thereof.
2.04 Capital Structure of the Receiving Association. As of
December 31, 1996, DGNB Louisiana had capital of $2,341,210 divided into
234,121 shares of common stock authorized, each of $10 par value ("DGNB
Louisiana Common Stock"), surplus of $40,990,527 and undivided profits,
including capital reserves, of $12,480,851. As of December 31, 1996, Bank had
capital of $2,500,000 divided into 100,000 shares of common stock authorized,
each of $25.00 par value, surplus of $1,250,000 and undivided profits of
$1,589,359.
On the Effective Date, the amount of capital of the Receiving
Association shall be $2,341,210 divided into 234,121 shares of common stock,
each of the par value of $10, and on the Effective Date, the Receiving
Association shall have a surplus of $40,990,227, plus the value of the
consideration to be paid by DGC in the Holding Company Merger, and undivided
profits, including capital reserves, which when combined with capital and
surplus will be equal to the capital structure of DGNB Louisiana, as set forth
above, adjusted, however, for the results of operations of DGNB Louisiana
between December 31, 1996 and the Effective Date, and for any other
acquisitions which may be consummated between December 31, 1996 and the
Effective Date.
2.05 Effects of the Bank Merger. On the Effective Date, the
corporate existence of each of the Merging Associations shall be merged into
and continued in DGNB Louisiana, the Receiving Association, and such Receiving
Association shall be deemed to be the same corporation as each bank or banking
association participating in the Bank Merger. All rights, franchises and
interests of the individual Merging Associations in and to every type of
property (real, personal and mixed) and choses in action shall be transferred
to and vested in the Receiving Association by virtue of the Bank Merger without
any deed or other transfer. The Receiving Association, upon the Bank Merger and
without any order or other action on the part of any court or otherwise, shall
hold and enjoy all rights of
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<PAGE> 78
property, franchises and interests, including appointments, designations and
nominations, and all other rights and interests as trustee, executor,
administrator, registrar of stocks and bonds, guardian of estates, and in every
other fiduciary capacity, in the same manner and to the same extent as such
rights, franchises and interests were held or enjoyed by any one of the Merging
Associations at the time of the Bank Merger, subject to the conditions
specified in 12 U.S.C. ss. 215a(f). The Receiving Association shall, from and
after the Effective Date, be liable for all liabilities of the Merging
Associations.
2.06 Tax Consequences. It is intended that the Bank Merger
shall constitute a tax-free reorganization pursuant to Section 368(a)(1)(A) of
the Code, and that the transactions made the subject matter of the plan shall
constitute a "plan of reorganization" for purposes of the rules and regulations
governing Code Section 368.
Article III.
REPRESENTATIONS AND WARRANTIES OF
BANK OF COMMERCE AND NBC FINANCIAL CORPORATION
Bank and NBC hereby make the following representations and
warranties to DGC and DGNB Louisiana:
3.01 Corporate Organization. (a) Bank is a state banking
corporation duly organized, validly existing and in good standing under the
laws of the State of Louisiana. Bank has the power and authority to own or
lease all of its properties and assets and to carry on its business as it is
now being conducted.
(b) NBC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Louisiana. NBC has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary.
3.02 Capitalization. (a) The authorized capital stock of Bank
consists of 125,000 shares of common stock, $25.00 par value (the "Bank Common
Stock"). At the close of business on December 31, 1996, there were 100,000
shares of Bank Common Stock issued and outstanding and no shares held in Bank's
treasury. Except as set forth on Schedule 3.02 hereto, all issued and
outstanding shares of Bank Common Stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights with no
personal liability attaching to the ownership thereof. Except as set forth on
Schedule 3.02 hereof, Bank has not issued any additional shares of Bank Common
Stock since December 31, 1996, and does not have and is not bound by any
outstanding subscription, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Bank
Common Stock or any security representing the right to purchase or otherwise
receive any Bank Common Stock. NBC has good, valid and marketable title to, the
Bank Common Stock, and on the Effective Date the same will be free and clear of
all liens, encumbrances, pledges, claims, options, charges and assessments of
any nature whatsoever, except as provided in La. R.S. 6:262. The Louisiana
Commissioner of Financial Institutions has taken no action pursuant to Section
6:262A.
(b) The authorized capital stock of NBC consists of 10,000,000
shares of NBC Common Stock and 1,000,000 shares of Preferred Stock. At the
close of business on December 31, 1996, there were 469,660 shares of NBC Common
Stock issued and outstanding and no shares held in NBC's treasury and no shares
of Preferred Stock outstanding or held as Treasury shares. Except as set forth
on Schedule 3.02 hereto, all issued and outstanding shares of NBC Common Stock
have been duly authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights with no personal liability attaching to the
ownership thereof. Except as set forth on Schedule 3.02 hereof, NBC has not
issued any additional shares of NBC Common Stock since December 31, 1996, and,
except as set forth in this Section 3.02, does not have and is not bound by any
outstanding subscription, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of NBC
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<PAGE> 79
Common Stock or any security representing the right to purchase or otherwise
receive any NBC Common Stock. As of the date of this Agreement, options to
acquire 87,777 shares of NBC Common Stock are outstanding, all of which shall
be exercised or terminated on or before the Effective Date.
3.03 Investments; No Subsidiaries. The "NBC Consolidated
Group," as such term is used in this Agreement, consists of NBC and Bank.
Except as set forth on Schedule 3.03 hereof, neither Bank nor NBC has any
subsidiaries or equity interest or other investment, direct or indirect, in any
corporation, partnership, joint venture or other entity except for such equity
interest or other investment which Bank may have acquired as a result of
foreclosure and is as of the date hereof holding subject to sale.
3.04 Loan Portfolio. All loans, discounts and financing leases
(in which any member of the NBC Consolidated Group is lessor) reflected on the
NBC Latest Balance Sheet (as defined in Section 3.07) (a) were, at the time and
under the circumstances in which made, made for good, valuable and adequate
consideration in the ordinary course of business of the NBC Consolidated Group,
(b) are evidenced by genuine notes, agreements or other evidences of
indebtedness and (c) to the extent secured, have been secured by valid liens
and security interests which have been perfected. Set forth in Schedule 3.04
hereto is a true and complete list of all real property in which Bank has an
interest as creditor or mortgagee in an amount greater than $50,000. Except as
set forth in Schedule 3.04 hereto, there are no outstanding loans held by Bank
with an unpaid balance of $25,000 or more in which a material default has
occurred. A material default for purposes of this Section 3.04 includes,
without limitation, the failure to pay indebtedness or an installment thereof
more than sixty (60) days after it is due and payable.
3.05 Authority; No Violation. Each of Bank and NBC has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby by
Bank have been duly and validly approved by the Board of Directors of Bank,
and, except for approval by NBC as the sole shareholder of Bank, no other
corporate proceedings on the part of Bank are necessary to consummate the
transactions so contemplated. The Board of Directors of NBC has duly and
validly approved this Agreement and the transactions contemplated hereby and
has authorized the execution and delivery of this Agreement by NBC, and, except
for the approval of this Agreement by its shareholders, no other corporate
proceedings on the part of NBC are necessary to consummate the transactions so
contemplated. This Agreement has been duly and validly executed and delivered
by Bank and NBC and constitutes a valid and binding obligation of Bank and of
NBC enforceable against each in accordance with its terms, except that
enforcement may be limited by bankruptcy, reorganization, insolvency and other
similar laws and court decisions relating to or affecting the enforcement of
creditors' rights generally and by general equitable principles.
3.06 Consents and Approvals. Except as set forth in Schedule
3.06 hereto, no permit, consent, approval or authorization of, or declaration,
filing or registration with, any public body or authority or to the knowledge
of Bank and NBC any third party is necessary in connection with (i) the
execution and delivery by Bank or NBC of this Agreement, or (ii) the
consummation by NBC or Bank of the Mergers and the other transactions
contemplated hereby.
3.07 Financial Statements. (a) NBC has previously delivered to
DGC and DGNB Louisiana copies of the consolidated balance sheets of NBC as of
December 31 in each of the three fiscal years 1994 through 1996, inclusive, and
the related consolidated statements of income, changes in shareholders' equity
and changes in cash flows for the periods then ended, in each case accompanied
by the audit report of Hannis T. Bourgeois & Co., independent public
accountants with respect to NBC ("NBC Financial Statements"). The December 31,
1996, consolidated balance sheet (the "NBC Latest Balance Sheet") of NBC
(including the related notes, where applicable) fairly represents in all
material respects the consolidated financial position of NBC and its
subsidiaries as of the date thereof, and the other financial statements
referred to herein (including the related notes, where applicable) fairly
present the results of the consolidated operations and changes in shareholders'
equity and cash flow of NBC and its subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth.
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(b) Each of the financial statements above is true and correct
in all material respects, and has been prepared in accordance with generally
accepted accounting principles applied on a basis consistent with other
periods, except as otherwise noted.
3.08 No Broker's Fees. Except as fully described and set forth
in Schedule 3.08 hereto, neither Bank, NBC nor any of their officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement.
3.09 Title to Properties; Encumbrances. Except as set forth in
Schedule 3.09 hereto, Bank and NBC have good, valid and marketable title to, or
a valid leasehold interest in, (a) all their real properties and (b) all other
properties and assets reflected in the NBC Latest Balance Sheet, other than any
of such properties or assets which have been sold or otherwise disposed of
since the date of the NBC Latest Balance Sheet in the ordinary course of
business and consistent with past practice. Except as set forth in Schedule
3.09 hereto, all of such properties and assets are free and clear of all title
defects, mortgages, pledges, liens, claims, charges, security interests or
other encumbrances of any nature whatsoever, including, without limitation,
leases, options to purchase, conditional sales contracts, collateral security
arrangements and other title or interest arrangements, and are not, in the case
of real property, subject to any easements, building use restrictions,
exceptions, reservations or limitations of any nature whatsoever, except, with
respect to all such properties and assets, liens for current taxes and
assessments not in default, minor imperfections of title, and encumbrances, if
any, which have arisen in the ordinary course of business, which are not
substantial in character, amount or extent and which do not detract from the
value of or interfere with the present or contemplated use of any of the
properties subject thereto or affected thereby or otherwise impair the business
operations conducted or contemplated by Bank or NBC. All personal property
material to the business, operations or financial condition of Bank or NBC, and
all buildings, structures and fixtures used by Bank or NBC in the conduct of
their businesses, are in good operating condition and repair, ordinary wear and
tear excepted. Except as set forth in Schedule 3.09 hereto, neither Bank nor
NBC has received any notification of any violation (which has not been cured)
of any building, zoning or other law, ordinance or regulation in respect of
such property or structures or Bank's or NBC's use thereof.
3.10 No Undisclosed Liabilities. Except as set forth in
Schedule 3.10 hereto, as of the date hereof neither Bank nor NBC has any
liabilities or obligations of any nature (whether absolute, accrued, contingent
or otherwise and whether due or to become due), except liabilities and
obligations (i) fully reflected or reserved against in the NBC Latest Balance
Sheet or disclosed in the notes thereto or (ii) incurred since the date of the
NBC Latest Balance Sheet in the ordinary course of business and consistent with
past practice, which liabilities or obligations are, either individually or in
the aggregate, material to NBC.
3.11 Absence of Certain Changes or Events. (a) Except as set
forth in Schedule 3.11 hereto, since the date of the NBC Latest Balance Sheet,
there has not been:
i) any material adverse change in the business, operations,
properties, assets or financial condition of Bank or NBC, or any event
which has had or will have a material adverse effect on any of the
foregoing;
ii) any loss, damage, destruction or other casualty materially
and adversely affecting any of the properties, assets or business of
Bank or NBC or any of their subsidiaries (whether or not covered by
insurance);
iii) any increase of more than ten percent (10%) in the
compensation payable by Bank or NBC to any of their directors,
officers, agents, consultants, or any of their employees whose total
compensation after such increase was in excess of $25,000 per annum,
or any extraordinary bonus, percentage compensation, service award or
other like benefit granted, made or accrued to the credit of any such
director, officer, agent, consultant or employee, or any extraordinary
welfare, pension, retirement or similar
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payment or arrangement made or agreed to by Bank or NBC for the benefit
of any such director, officer, agent, consultant or employee;
iv) any change in any method of accounting or accounting practice of
Bank or NBC;
v) any loan in excess of $25,000 or portion thereof rescheduled as to
payments thereon, subject to a moratorium on payment thereof or written
off by Bank or NBC as uncollectible; or
vi) any agreement or understanding, whether in writing or otherwise,
of Bank or NBC to do any of the foregoing.
(b) Except as set forth in Schedule 3.11 hereto, since the date of the NBC
Latest Balance Sheet, neither Bank nor NBC has:
i) issued or sold any promissory note, stock, bond or other corporate
security of which it is the issuer in an amount greater than $25,000;
ii) discharged or satisfied any lien or encumbrance or paid or
satisfied any obligation or liability (whether absolute, accrued,
contingent or otherwise and whether due or to become due) in an amount
greater than $25,000 as to each such lien, encumbrance, obligation or
liability other than current liabilities shown on the NBC Latest Balance
Sheet and current liabilities incurred since the date of the NBC Latest
Balance Sheet in the ordinary course of business and consistent with past
practice and other than any such lien, encumbrance, obligation or
liability of the nature (regardless of amount) required to be disclosed
pursuant to Section 3.11(a)(iii) hereto;
iii) declared, paid or set aside for payment any dividend or other
distribution (whether in cash, stock or property) in respect of its
capital stock dividends by Bank to NBC except to the extent necessary to
pay necessary and routine expenses of NBC;
iv) split, combined or reclassified any shares of its capital stock,
or redeemed, purchased or otherwise acquired any shares of its capital
stock or other securities;
v) sold, assigned or transferred any of its assets (real, personal or
mixed, tangible or intangible), canceled any debts or claims or waived any
rights of substantial value, except, in each case, in the ordinary course
of business and consistent with past practice;
vi) sold, assigned, transferred or permitted to lapse any patents,
trademarks, trade names, copyrights or other similar assets, including
applications or licenses therefor;
vii) paid any amounts or incurred any liability to or in respect of,
or sold any properties or assets (real, personal or mixed, tangible or
intangible) to, or engaged in any transaction (other than any transaction
of the nature (regardless of amount) required to be disclosed pursuant to
Section 3.11(a)(iii) hereof) or entered into any agreement or arrangement
with, any corporation or business in which Bank, NBC or any of their
officers or directors, or any "affiliate" or "associate" (as such terms
are defined in the rules and regulations promulgated under the Securities
Act) of any such person, has any direct or indirect interest;
viii) entered into any collective bargaining agreements; or
ix) entered into any other transaction other than in the ordinary
course of business and consistent with past practice or in connection with
the transactions contemplated by this Agreement.
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3.12 Leases. Set forth in Schedule 3.12 hereto is an accurate and
complete list of all leases calling for annual rent payments in excess of
$10,000 pursuant to which Bank or NBC, as lessee, leases real or personal
property, including, without limitation, all leases of computer or computer
services and all arrangements for time-sharing or other data processing
services, describing for each lease Bank's or NBC's financial obligations under
such lease its rental payments, expiration date and renewal terms. Except as
set forth in Schedule 3.12 hereto: (a) all such leases are in full force and
effect in accordance with their terms; (b) there exists no event of default or
event, occurrence, condition or act which with the giving of notice, the lapse
of time or the happening of any further event or condition would become a
default under any such lease; and (c) neither Bank nor NBC is a lessee under a
lease having an unexpired term greater than 36 months that requires Bank or NBC
to make payments for the use of any property at rates currently higher than
prevailing market rates for similar properties in the localities where such
properties are located.
3.13 Trademarks; Trade Names. Set forth in Schedule 3.13 hereto is an
accurate and complete list and brief description of all trademarks (either
registered or common law), trade names and copyrights (and all applications and
licenses therefor) owned by Bank or NBC or in which they have any interest.
Bank and NBC own, or have the rights to use, all trademarks, trade names and
copyrights used in or necessary for the ordinary conduct of their existing
businesses as heretofore conducted, and the consummation of the transactions
contemplated hereby will not alter or impair any such rights. Except as set
forth in Schedule 3.13 hereto, no claims are pending by any person for the use
of any trademarks, trade names or copyrights or challenging or questioning the
validity or effectiveness of any license or agreement relating to the same, nor
is there any valid basis for any such claim, challenge or question, and use of
such trademarks, trade names and copyrights by Bank or NBC does not infringe on
the rights of any person.
3.14 Compliance with Applicable Law. Bank and NBC hold, and have at
all times held, all licenses, franchises, permits and governmental
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied in all material respects with and
are not in default in any respect under any, applicable statutes, laws,
ordinances, rules, regulations, and orders of all federal, state and local
governmental bodies, agencies and subdivisions having, asserting or claiming
jurisdiction over them or over any part of their operations (to the extent that
such default could result in a material limitation on the conduct of Bank's or
NBC's business, or could cause Bank or NBC to incur a substantial financial
penalty); and, except as set forth in Schedule 3.14 hereto, neither Bank nor
NBC has received notice of a violation of, and does not know of any violation
of or of any valid basis for any claim of a violation of, any of the above.
3.15 Absence of Questionable Payments. Bank and NBC have not, and, to
the knowledge of Bank or NBC, no director, officer, agent, employee, consultant
or other person acting on behalf of, Bank or NBC has, (a) used any Bank or NBC
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity or (b) made any direct or
indirect unlawful payments to government officials from any Bank or NBC
corporate funds, or established or maintained any unlawful or unrecorded
accounts with funds received from Bank or NBC.
3.16 Insurance. Set forth in Schedule 3.16 hereto is an accurate and
complete list of all policies of insurance, including the amounts thereof,
owned by Bank or NBC or in which Bank or NBC is named as the insured party. All
such policies are valid, outstanding and enforceable and will remain in full
force and effect at least through the consummation of the transactions
contemplated by this Agreement. Such insurance with respect to Bank's and NBC's
property and the conduct of their businesses is in such amounts and against
such risks as are usually insured against by persons operating similar
properties and businesses in the State of Louisiana and, in the opinion of
management of NBC and Bank, are adequate for the conduct of Bank's and NBC's
businesses. Except as set forth in Schedule 3.16 hereto, neither Bank nor NBC
has ever been refused any insurance nor have their coverages been limited by
any insurance carrier to which they have applied for insurance or with which
they have carried insurance during the last five (5) years.
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3.17 Powers of Attorney; Guarantees. Except as set forth in Schedule
3.17 hereto, other than in the ordinary course of business neither Bank nor NBC
has given any power of attorney to any person to act on its behalf, or has any
obligation or liability, either actual, accruing or contingent, as guarantor,
surety, cosigner, endorser, co-maker or indemnitor in respect of the obligation
of any person, corporation, partnership, joint venture, association,
organization or other entity, which is still in effect.
3.18 Tax Matters. Bank and NBC make the following representations with
respect to tax matters:
(a) For purposes of this Section, the following definitions shall
apply:
(1) The term "Taxes" shall mean all taxes, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, state or local government
or any agency or political subdivision of any such government, which taxes
shall include, without limiting the generality of the foregoing, all income or
profits taxes (including, but not limited to, federal income taxes and state
income taxes), real property gains taxes, payroll and employee withholding
taxes, unemployment insurance taxes, social security taxes, sales and use
taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts taxes,
business license taxes, occupation taxes, real and personal property taxes,
stamp taxes, environmental taxes, transfer taxes, workers' compensation,
Pension Benefit Guaranty Corporation premiums and other governmental charges,
and other obligations of the same or of a similar nature to any of the
foregoing, which any member of the NBC Consolidated Group is required to pay,
withhold or collect.
(2) The term "Returns" shall mean all reports, estimates, declarations
of estimated tax, information statements and returns relating to, or required
to be filed in connection with, any Taxes, including information returns or
reports with respect to backup withholding and other payments to third parties.
(b) To the knowledge of the NBC Consolidated Group, all Returns
required to be filed by or on behalf of members of the NBC Consolidated Group
have been duly filed and, to the knowledge of the NBC Consolidated Group, such
Returns are true, complete and correct in all material respects. All Taxes
shown to be payable on the Returns or on subsequent assessments with respect
thereto have been paid in full on a timely basis, and no other Taxes are
payable by the NBC Consolidated Group with respect to items or periods covered
by such Returns or with respect to any period prior to the date of this
Agreement. Each member of the NBC Consolidated Group has withheld and paid over
all Taxes required to have been withheld and paid over, and complied with all
information reporting and backup withholding requirements, including
maintenance of required records with respect thereto, in connection with
amounts paid or owning to any employee, creditor, independent contractor, or
other third party. There are no liens on any of the assets of any member of the
NBC Consolidated Group with respect to Taxes, other than liens for Taxes not
yet due and payable or for Taxes that a member of the NBC Consolidated Group is
contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established.
(c) The Returns of the NBC Consolidated Group have never been audited
by a government or taxing authority, nor to the knowledge of the NBC
Consolidated Group, is any such audit in process, pending or threatened. To the
knowledge of the NBC Consolidated Group, no deficiencies exist or have been
asserted or are expected to be asserted with respect to Taxes of the NBC
Consolidated Group, and no member of the NBC Consolidated Group has received
notice or expects to receive notice that it has not filed a Return or paid
Taxes required to be filed or paid by it. No member of the NBC Consolidated
Group is a party to any action or proceeding for assessment or collection of
Taxes, nor to the knowledge of the NBC Consolidated Group, has such event been
asserted or threatened against any member of the NBC Consolidated Group or any
of its assets. No waiver or extension of any statute of limitations is in
effect with respect to Taxes or Returns of the NBC Consolidated Group.
3.19 Benefit and Employee Matters. (a) Schedule 3.19(a) lists all
pension, retirement, stock option, stock purchase, stock ownership, savings,
stock appreciation right, profit sharing, deferred compensation, employment,
compensation arrangements, consulting, bonus, collective bargaining, group
insurance and other employee benefit, incentive and welfare policies,
contracts, plans and arrangements, and all trust agreements related thereto
established
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or maintained by NBC or Bank, for the benefit of any of the present or former
directors, officers, or other employees of Bank and NBC. Schedule 3.19(a) also
identifies each "employee benefit plan," as such term is defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") maintained or contributed to by any member of the NBC Consolidated
Group. Except as set forth in Schedule 3.19(a) hereto, neither Bank nor NBC
maintains or contributes to any "employee benefit plan," as such term is
defined in Section 3 of ERISA. Except as set forth in Schedule 3.19(a), all
"employee benefit plans" maintained by Bank or NBC (all such plans being listed
in Schedule 3.19(a) hereto) (collectively, the "Bank Plans") are in material
compliance with the provisions of ERISA and the applicable provisions of the
Code. No member of the NBC Consolidated Group has ever maintained or become
obligated to contribute to any "employee benefit plan" as such term is defined
in Section 3(3) of ERISA, (i) that is subject to Title IV of ERISA or (ii) that
is a multiemployer plan under Title IV of ERISA. To the knowledge of the NBC
Consolidated Group, no "prohibited transaction," as defined in Section 406 of
ERISA or Section 4975 of the Code, has occurred that could result in liability
to NBC, Bank or DGC or DGNB Louisiana. No member of the NBC Consolidated Group
has any current or projected liability in respect of post-employment welfare
benefits for retired, current or former employees, except as required to avoid
excise tax under Section 4980B of the Code.
(b) Except as set forth in Schedule 3.19(b) hereto, during the last
five (5) years neither Bank nor NBC has been or is a party to any collective
bargaining or other labor contract. During the last five years, there has not
been, there is not presently pending or existing, and there is not threatened,
(a) any strike, slowdown, picketing, work stoppage, or employee grievance
process, (b) any proceeding against or affecting any Bank or NBC relating to
the alleged violation of any legal requirement pertaining to labor relations or
employment matters, including any charge or complaint filed by an employee or
union with the National Labor Relations Board, the Equal Employment Opportunity
Commission, or any comparable Governmental Body, organizational activity, or
other labor or employment dispute against or affecting Bank or NBC or their
premises, or (c) any application for certification of a collective bargaining
agent. No event has occurred or circumstance exists that could provide the
basis for any work stoppage or other labor dispute. There is no lockout of any
employees by any Bank and NBC, and no such action is contemplated by any. Bank
and NBC have complied in all material respects with all legal requirements
relating to employment, equal employment opportunity, nondiscrimination,
immigration, wages, hours, benefits, collective bargaining, the payment of
social security and similar taxes, and occupational safety and health. Neither
Bank nor NBC is liable for the payment of any compensation, damages, taxes,
fines, penalties, or other amounts, however designated, for failure to comply
with any of the foregoing legal requirements.
3.20 Contracts and Commitments; No Default. (a) The following
information relating to Bank and NBC has been made available to DGC or DGNB
Louisiana:
i) to the extent permitted by law, any bank regulatory agency
reports relating to the examination of Bank which have been made
available to Bank or NBC for the past five (5) years;
ii) the name of each bank with which Bank or NBC has an account
or safekeeping or custodial arrangement or correspondent relationship
and the names of all persons who are authorized with respect thereto;
iii) all mortgages, indentures, promissory notes, deeds of trust,
loan or credit agreements or similar instruments under which Bank or
NBC is indebted in an amount greater than $50,000 for borrowed money
or the price of purchased property, accompanied by originals or
certified copies thereof and all amendments or modifications of any
thereof (other than certificates of deposit and other depository
instruments);
iv) any loans, including any other credit arrangements by Bank,
to any holder of ten percent (10%) or more of NBC Common Stock, to any
of Bank's or NBC's directors or executive officers, to any members of
the immediate families of any of Bank's or NBC's directors or
executive officers or to any
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corporation, firm or other organization in which any of such directors
or executive officers has, directly or indirectly, beneficial
ownership of more than ten percent (10%); and
v) any pending application, including any documents or materials
relating thereto, which has been filed by Bank or NBC with any bank
regulatory authority in order to obtain the approval of such bank
regulatory authority for the establishment of a new branch bank or a
new subsidiary bank.
(b) Except as set forth in Schedule 3.20 hereto, neither Bank nor NBC
is a party to or bound by, nor have any bids or proposals been made by or to
Bank or NBC with respect to, any written or oral, express or implied:
i) contract relating to the matters referred to in paragraph
(a) above;
ii) contract with or arrangement for directors, officers,
employees, former employees, agents or consultants with respect to
salaries, bonuses, percentage compensation, pensions, deferred
compensation or retirement payments, or any profit-sharing, stock
option, stock purchase or other employee benefit plan or arrangement,
other than the contracts or arrangements referred to in Schedule
3.19(a) and Schedule 3.24;
iii) collective bargaining or union contract or agreement;
iv) contract, commitment or arrangement for the borrowing of
money or for a line of credit in an amount greater than $50,000;
v) contract, commitment or arrangement for the lending of money
or for the granting of a line of credit in an amount greater than
$100,000;
vi) contract or agreement for the future purchase by it of any
materials, equipment, services, or supplies, which is not in the
ordinary course of business, and has a term of more than twelve (12)
months (including periods covered by any option to renew by either
party);
vii) contract containing covenants purporting to limit its
freedom to compete; or
viii) contract or commitment for the acquisition, construction or
refurbishment of any property, plant or equipment, other than
contracts and commitments for the acquisition, construction or
refurbishment of any property, plant or equipment not in excess of
$20,000 for any one establishment or $50,000 in the aggregate.
(c) Each of Bank and NBC has performed all the obligations required to
be performed by it under any contract, agreement, arrangement, commitment or
other instrument to which it is a party (including, without limitation, any of
those described in paragraphs (a) and (b) of this Section 3.20), and there is
not, with respect to any such contract, agreement, commitment or other
instrument, (i) any notice of violation, or (ii) any existing default (or event
which, with or without due notice or lapse of time or both, would constitute a
default) on the part of Bank or NBC, which default would have a material
adverse effect on its business, operations, properties, assets or financial
condition, and neither Bank nor NBC has received notice of any such default,
nor has Bank or NBC knowledge of any facts or circumstances which would
reasonably indicate that it will be or may be in default under, any such
contract, agreement, arrangement, commitment or other instrument subsequent to
the date hereof.
3.21 Disclosure. All facts material to the business, operations,
properties, assets, liabilities (contingent or otherwise), financial condition
and prospects of Bank and NBC have been disclosed to DGC and DGNB Louisiana in
writing in or pursuant to this Agreement. No representation or warranty
contained in this Agreement, and no statement contained in any schedule or
certificate, list or other writing furnished to DGC or DGNB Louisiana pursuant
to the provisions hereof, contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements herein
or therein not misleading. No information material to this
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transaction which is necessary to make the representations and warranties
herein contained not misleading has been withheld from, or has not been
delivered in writing to, DGC and DGNB Louisiana.
3.22 Litigation. Except as listed on Schedule 3.22, there are no
actions, suits, proceedings, arbitrations or investigations pending or, to the
knowledge of NBC or Bank, threatened, before any court, any governmental agency
or instrumentality or any arbitration panel, against or affecting NBC or Bank
or any of their subsidiaries or any of the directors, officers, or employees of
the foregoing in their capacities as such, and to the knowledge of NBC or Bank
no facts or circumstances exist that would be likely to result in the filing of
any such action that would have a material adverse effect on NBC or Bank.
Neither NBC or Bank nor any of their subsidiaries is subject to any currently
pending judgment, order or decree entered in any lawsuit or proceeding.
3.23 Environmental Matters. (a) To the best knowledge of each, NBC and
Bank are, and have been, in compliance with all applicable federal, state and
local laws, regulations, rules and decrees pertaining to pollution or
protection of the environment ("Environmental Laws"), including without
limitation the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. ss. 9601 et seq., the Resource Conservation and
Recovery Act, 42 U.S.C. ss. 6901 et seq., the Louisiana Environmental Quality
Act, La. R.S. 30: 2001 et seq., or any similar federal, state or local law,
except for such instances of non-compliance that are not reasonably likely to
have, individually or in the aggregate, a material adverse effect on the
financial condition, results of operations, business or prospects of NBC and
Bank.
(b) To the best knowledge of each, all property owned, leased,
operated or managed by NBC or Bank, or in which NBC or Bank has any interest,
including any mortgage or security interest ("Business Property"), and all
businesses and operations conducted on any of the Business Property (whether by
NBC or Bank, a mortgagor, or any other person), are, and have been, in
compliance with all applicable Environmental Laws, except for such instances of
non-compliance that are not reasonably likely to have, individually or in the
aggregate, a material adverse effect on the financial condition, results of
operations, business or prospects of NBC or Bank.
(c) To the best knowledge of each, there is no judicial,
administrative, arbitration or other similar proceeding pending or threatened
before any court, governmental agency, authority or other forum in which NBC or
Bank or any prior owner of any Business Property has been or, with respect to
threatened matters, is threatened to be named as a party relating to (i)
alleged noncompliance with any applicable Environmental Law or (ii) the release
or threatened release into the environment of any Hazardous Substance (as
defined below), and relating to any of the Business Property, except for such
proceedings pending or threatened that are not reasonably likely to have,
individually or in the aggregate, a material adverse effect on the financial
condition, results of operations, business or prospects of NBC or Bank, and to
the knowledge of each there is no reasonable basis for any such proceeding. The
term "Hazardous Substance" means any pollutant, contaminant, or toxic or
hazardous substance, chemical, or waste defined, listed or regulated by any
Environmental Law (and specifically shall include, but not be limited to,
asbestos, polychlorinated biphenyls, and petroleum and petroleum products).
(d) To the best knowledge of each, there has been no release or
threatened release of a Hazardous Substance in, on, under, or affecting any of
its Business Property, except such release or threatened release that is not
reasonably likely to have, individually or in the aggregate, a material adverse
effect on the financial condition, results of operations, business or prospects
of NBC or Bank.
3.24 Contract Termination Provisions. Except for those contracts set
forth in Schedule 3.24 hereto, all contracts between Bank or NBC and any
employee thereof or independent contractor thereto shall, by the terms of such
contracts or a written addendum thereto, be terminable by DGC or DGNB Louisiana
following the Mergers, upon no more than thirty (30) day's written notice to
the employee or independent contractor.
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Article IV.
REPRESENTATIONS AND WARRANTIES OF DGC
AND DGNB LOUISIANA
DGC and DGNB Louisiana represent and warrant to Bank and NBC as
follows:
4.01 Corporate Organization. DGC is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Mississippi and DGNB Louisiana is a national banking association duly
organized, validly existing and in good standing under the laws of the United
States. DGC and DGNB Louisiana, respectively, have the corporate power and
authority (and DGNB Louisiana has received appropriate authorizations from the
OCC), to own or lease all of their properties and assets and to carry on their
businesses as they are now being conducted.
4.02 Capitalization. The authorized capital stock of DGC consists of
100,000,000 shares of DGC Common Stock, 25,000,000 shares of Class A Voting
Preferred Stock, no par value, and 25,000,000 shares of Class B Non-Voting
Preferred Stock, no par value (collectively, "the DGC Preferred Stock"). At the
close of business on December 31, 1996, there were 19,379,643 shares of DGC
Common Stock issued and outstanding and no shares of DGC Preferred Stock had
been issued. In addition, options to acquire 677,584 shares of DGC Common Stock
were outstanding. The authorized capital stock of DGNB Louisiana consists of
234,121 shares of DGNB Louisiana Common Stock. At the close of business on
December 31, 1996, there were 234,121 shares of DGNB Louisiana Common Stock
issued and outstanding, one hundred percent (100%) of which shares were owned
by Deposit Guaranty Louisiana Corp., a wholly-owned subsidiary of DGC. All
issued and outstanding shares of DGC Common Stock have been, and the shares of
DGC Common Stock to be issued pursuant to the Holding Company Merger will be,
duly authorized and validly issued, and all such shares are and will be fully
paid. Except as referred to above, DGC does not have and is not bound by any
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of DGC
Common Stock or DGC Preferred Stock or any security representing the right to
purchase or otherwise receive any DGC Common Stock or DGC Preferred Stock.
4.03 Authority; No Violation. (a) DGC and DGNB Louisiana,
respectively, have full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
respective Boards of Directors of DGC and DGNB Louisiana, or a majority
thereof, have duly and validly approved and adopted this Agreement and the
transactions contemplated hereby, have executed or authorized the execution of
and have authorized the delivery of this Agreement, and except for approval by
the sole shareholder of DGNB Louisiana, no other corporate proceedings on the
part of DGC or DGNB Louisiana are necessary or desirable to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by DGC and DGNB Louisiana and constitutes a valid and binding
obligation of each of DGC and DGNB Louisiana, enforceable in accordance with
its terms.
(b) Neither the execution and delivery of this Agreement by DGC or
DGNB Louisiana nor the consummation by DGC or DGNB Louisiana of the
transactions contemplated hereby, nor compliance by DGC or DGNB Louisiana with
any of the provisions hereof, will (i) violate any provision of the Certificate
of Incorporation or Bylaws of DGC, or the Articles of Association or Bylaws of
DGNB Louisiana, (ii) to the best knowledge of DGC and DGNB Louisiana violate
any statute, code, ordinance, rule, regulation, judgment, order, writ, decree
or injunction applicable to DGC or DGNB Louisiana, or any of their subsidiaries
or any of their respective properties or assets, or (iii) to the best knowledge
of DGC and DGNB Louisiana violate, conflict with, result in a breach of any
provisions of, constitute a default (or an event which, with or without due
notice or lapse of time, or both, would constitute a default) under, result in
the termination of, accelerate the performance required by, or result in the
creation of any lien, security interest, charge or other encumbrance upon any
of the respective properties or assets of DGC or DGNB Louisiana, or any of
their subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which
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DGC or DGNB Louisiana, or any of their respective subsidiaries is a party, or
by which they or any of their respective properties or assets may be bound or
affected, or which either individually or in the aggregate will not have a
material adverse effect on the business, operations, properties, assets or
financial condition of DGC, DGNB Louisiana or any of their respective
subsidiaries.
4.04 Consents and Approvals. Except for consents and approvals of, or
filings or registrations, with the SEC, the NYSE, OCC, the Federal Reserve
Bank, the FDIC, and the Commissioner, no consents or approvals of or filings or
registrations with any third party or any public body or authority are
necessary in connection with (i) the execution and delivery by DGC and DGNB
Louisiana of this Agreement or (ii) the consummation of the Mergers and the
other transactions contemplated hereby.
4.05 Legality of DGC Common Stock. The DGC Common Stock to be issued
in connection with the Holding Company Merger, when issued and delivered in
accordance with the terms hereof, will be duly authorized, validly issued,
fully paid and non-assessable, and free of pre-emptive rights.
4.06 SEC Documents; Financial Statements. DGC has filed all required
reports, schedules, forms, statements and other documents with the SEC since
January 1, 1994 (the "DGC SEC Documents"), complete copies of which have been
provided to NBC. The DGC SEC Documents complied as to form in all material
respects with the requirements of the Securities Act or the Exchange Act, as
the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such DGC SEC Documents, and none of the DGC SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The DGC financial statements included in the DGC SEC Documents
have been audited by KPMG Peat Marwick LLP, certified public accountants (in
the case of the DGC audited financial statements) in accordance with generally
accepted auditing standards, have been prepared in accordance with generally
accepted accounting principles and, except as disclosed therein, applied on a
basis consistent with prior periods, and present fairly, in all material
respects, the financial position of DGC and its consolidated subsidiaries at
such dates and the results of operations and cash flows for the periods then
ended, except, in the case of the DGC interim financial statements, as
permitted by Rule 10-01 of Regulation S-X of the SEC. The DGC interim financial
statements reflect all adjustments (consisting only of normal recurring
adjustments) that are necessary for a fair statement of the results for the
interim periods presented therein. Neither DGC nor any of its consolidated
subsidiaries has, nor are any of their respective assets subject to, any
liability, commitment, debt or obligation (of any kind whatsoever whether
absolute or contingent, accrued, fixed, known, unknown, matured or unmatured)
that is material individually or in the aggregate, except as and to the extent
reflected on the latest balance sheet included in the DGC interim financial
statements (the "DGC Latest Balance Sheet"), or as may have been incurred or
may have arisen since the date of the DGC Latest Balance Sheet in the ordinary
course of business. Since the date of the DGC Latest Balance Sheet, there has
been no change that has had or is likely to have a material adverse effect on
DGC or its subsidiaries.
4.07 Litigation. Except as disclosed by DGC in any report filed by it
with the SEC prior to the date of this Agreement, there are no material
actions, suits, proceedings, arbitrations or investigations pending or, to the
knowledge of DGC and its subsidiaries, threatened against DGC or its
consolidated subsidiaries which are required to be disclosed pursuant to Items
3 and 5 of Form 8-K, Items 1 and 5 of Form 10-Q and Item 103 of Regulation S-K
of the SEC's Rules and Regulations, and, to the knowledge of DGC and its
subsidiaries, no facts or circumstances exist that would form the basis for
such actions, suits, proceedings, arbitrations or investigations.
4.08 Statements are True and Correct. None of the information included
in (a) the Registration Statement to be filed by DGC with the SEC in connection
with the DGC Common Stock to be issued in the Holding Company Merger in
accordance with Section 5.06 hereof, (b) the Proxy Statement to be mailed to
the shareholders of NBC in connection with its shareholders meeting, and (c)
any other documents to be filed with the SEC or any other regulatory authority
in connection with the transactions contemplated hereby that has been or will
be supplied by DGC or any of its subsidiaries, will, at the respective times
such documents are filed, and, in the case of the Registration Statement, when
it becomes effective and, with respect to the Proxy Statement, when first
mailed to the
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shareholders of NBC, be false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the statements
therein not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the NBC shareholders' meeting, be
false or misleading with respect to any material fact or omit to state any
material fact necessary to make the statements therein in light of the
circumstances under which they were made not misleading. All documents that DGC
is responsible for filing with the SEC or any other regulatory authority in
connection with the transactions contemplated hereby, will comply in all
material respects with the provisions of applicable law.
4.09 No Shareholder Vote. No vote of any class of shareholders of DGC
is required to approve this Agreement or the transactions contemplated hereby
in order to comply with the Mississippi Business Corporation Act, DGC's
Articles of Incorporation or Bylaws, or the rules and regulations of any
exchange on which the DGC Common Stock is listed or traded.
4.10 Broker's and Finder's Fee. No agent, broker, person or firm
acting on behalf of DGC or DGNB Louisiana is or will be entitled to any
commission or broker's or finder's fee from any of the parties hereto, or from
any affiliate of the parties hereto, in connection with any of the transactions
contemplated herein.
4.11 Disclosure. No representations or warranties by DGC or DGNB
Louisiana in this Agreement and no statement contained in the schedules or
exhibits or in any certificates to be delivered pursuant to this Agreement,
contains or will contain any untrue statement of material fact or omits or will
omit to state any material fact necessary, in light of the circumstances under
which it was made, in order to make the statements herein or therein not
misleading.
Article V.
COVENANTS OF THE PARTIES
5.01 Conduct of Business. Except with the consent of the other parties
hereto, during the period from the date of this Agreement to the Effective
Date:
(a) Bank and NBC will conduct their businesses and engage in
transactions only in the ordinary course and consistent with prudent banking
practice.
(b) Neither NBC nor Bank shall (i) increase by more than ten percent
(10%) the compensation payable by Bank or NBC to any of its directors,
officers, agents, consultants, or any of its employees whose total compensation
after such increase would be in excess of $25,000 per annum, (ii) grant or pay
any extraordinary bonus, percentage compensation, service award or other like
benefit to any such director, officer, agent, consultant or employee, or (iii)
make or agree to any extraordinary welfare, pension, retirement or similar
payment or arrangement for the benefit of any such director, officer, agent,
consultant or employee.
(c) Neither NBC nor Bank shall sell or dispose of material assets
except in the ordinary course of business.
(d) Neither NBC nor Bank shall enter into any new capital commitments
or make any capital expenditures, except commitments or expenditures within
existing operating and capital budgets or otherwise in the ordinary course of
business.
(e) Neither Bank nor NBC shall authorize or issue any additional
shares of any class of its capital stock or any securities exchangeable for or
convertible into any such shares or any options or rights to acquire any such
shares, nor shall Bank or NBC otherwise authorize or affect any change in its
capitalization.
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(f) No dividends shall be paid by NBC. No dividends shall be paid by
Bank except dividends by Bank to NBC to the extent necessary to fund authorized
dividends of NBC and to pay necessary and routine expenses of NBC.
5.02 Limitation on Actions. Prior to the Effective Date or until the
termination of this Agreement, NBC shall not, without the prior approval of the
chief executive officer of DGC,
(a) solicit or encourage inquiries or proposals with respect to; or
(b) except to the extent required in the opinion of its counsel by its
legal obligations, furnish any information relating to or participate in any
negotiations or discussions concerning, any acquisition or purchase of all or a
substantial portion of the assets of, or of a substantial equity interest in,
NBC or any subsidiary thereof, or any business combination with NBC or any
subsidiary thereof, other than as contemplated by this Agreement; and shall
instruct its officers, directors, agents and affiliates to refrain from doing
any of the above; provided, however, nothing herein shall be construed to
prohibit the Board of Directors of NBC, after prior notice to DGC, from
discussing or providing information to any person or entity that makes an
unsolicited, bona fide proposal to acquire all of the stock or assets of NBC,
if the said Board of Directors determines in good faith, on advice of counsel,
that such action is required for their compliance with fiduciary duties to
shareholders of NBC. If NBC furnishes information to or enters into discussions
or negotiations with another party prior to December 31, 1997, and (ii) NBC
enters into a definitive agreement with such party prior to June 30, 1998, then
NBC shall pay DGC a fee of $100,000, unless the Agreement is terminated by DGC
or DGNB Louisiana pursuant to Section 8.01(b) prior to NBC entering into a
definitive agreement with such party.
Bank and NBC agree to notify DGC by telephone within twenty-four hours
of receipt of any inquiry with respect to a proposed merger, consolidation,
assets acquisition, tender offer or other takeover transaction with another
person or receipt of a request for information from the FDIC, OCC or other
governmental authority with respect to a proposed acquisition of Bank or NBC by
another party.
5.03 Current Information. During the period from the date of this
Agreement to the Effective Date, Bank and NBC will cause one or more of its
designated representatives to confer on a regular and frequent basis with
representatives of DGC and to report the general status of its ongoing
operations. In addition, separate reporting on matters involving the loan
portfolio will occur monthly and will include, but not be limited to, (i) all
board reports, (ii) new and renewed loans (including loan applications), (iii)
delinquency reports, (iv) loan extensions, (v) to the extent possible, loan
policy exceptions, loan documentation exceptions, and financial statement
exceptions, (vi) watch list reports, (vii) all written communications
concerning problem loan accounts greater than $50,000, (viii) notification and
written details involving new loan products and/or loan programs, and (ix) such
other information regarding specific loans, the loan portfolio and management
of the loan portfolio as may be requested. Bank and NBC will promptly notify
DGC of any material change in the normal course of their business or in the
operation of their properties and of any governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), or the institution or the threat of litigation involving either
party, and will keep DGC fully informed of such events.
5.04 Access to Properties and Records; Confidentiality. (a) For
purposes of allowing the parties and their counsel to prepare regulatory
submissions, and for other relevant purposes, each party shall permit the other
reasonable access to their properties during normal business hours, and shall
disclose and make available to the other party and its agents all books, papers
and records relating to its assets, stock ownership, properties, operations,
obligations and liabilities, and, with respect to the NBC Consolidated Group,
including, but not limited to its: books of account (including their general
ledgers); tax records; minute books of directors' and shareholders' meetings;
charter documents; bylaws; material contracts and agreements; filings with any
regulatory authority; litigation files; compensatory plans affecting its
employees; and any other materials pertaining to business activities, projects
or programs in which the other parties may have a reasonable interest in light
of the proposed Mergers. No member of the NBC Consolidated Group shall be
required to provide access to or to disclose information where such access
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or disclosure would violate or prejudice the rights of any customer or other
person, would jeopardize the attorney-client privilege of the institution in
possession or control of such information, or would contravene any law, rule,
regulation, order, judgment, decree or binding agreement. The parties will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) All information furnished by any member of the NBC Consolidated
Group pursuant hereto shall be treated as the sole property of the party
furnishing the information until consummation of the Mergers contemplated
hereby and, if such Mergers shall not occur, DGC and DGNB Louisiana shall
return to NBC all documents or other materials containing, reflecting or
referring to such information, shall use its best efforts to keep confidential
all of such information, and shall not directly or indirectly use such
information for any competitive or other commercial purpose. The obligation to
keep such information confidential shall continue for two (2) years from the
date the proposed Mergers are abandoned and shall not apply to (a) any
information which (i) DGC and DGNB Louisiana can establish by convincing
evidence was already in its possession prior to the disclosure thereof by NBC
or Bank, (ii) was then generally known to the public or set forth in public
records, (iii) became known to the public through no fault of DGC or DGNB
Louisiana, or (iv) was disclosed to the party receiving the information by a
third party not bound by an obligation of confidentiality, or (b) disclosures
in accordance with an order of a court of competent jurisdiction.
5.05 Interim Financial Statements. As soon as reasonably available,
but in no event more than fifteen (15) days after the end of each month ending
after the date of this Agreement, Bank and NBC will deliver to DGC copies of
their monthly financial statements.
5.06 Regulatory Matters. (a) DGC shall prepare and file a registration
statement with the SEC on Form S-4 under the Securities Act (the "Registration
Statement"), including a proxy statement (the "Proxy Statement") to be mailed
to NBC shareholders in connection with the meeting to be called to consider the
Holding Company Merger, as soon as reasonably practicable following the date of
this Agreement. The Registration Statement shall comply in all material
respects with the Securities Act and DGC will use its best efforts to cause the
Registration Statement to be declared effective as soon as practicable, to
qualify the DGC Common Stock under the securities or blue sky laws of such
jurisdictions as may be required and to keep the Registration Statement and
such qualifications current and in effect for so long as is necessary to
consummate the transactions contemplated hereby.
(b) DGC will use its best efforts to prepare all necessary
documentation, to effect all necessary filings and to obtain all necessary
permits, consents, approvals and authorizations of all third parties and
governmental bodies necessary to consummate the transactions contemplated by
this Agreement, including those required by the OCC, the Federal Reserve Board,
the FDIC and the Commissioner.
(c) The parties shall cooperate in preparing the Registration
Statement and the Proxy Statement. NBC will promptly furnish all such data and
information relating to it and its subsidiaries as DGC may reasonably request
for the purpose of including such data and information in the Registration
Statement.
(d) DGC will indemnify and hold harmless NBC, each of its directors,
each of its officers and each person, if any, who controls NBC within the
meaning of the Securities Act against any losses, claims, damages or
liabilities, joint, several or solidary, to which they or any of them may
become subject, under the Securities Act or the Securities Exchange Act of
1934, any state securities or blue sky laws, or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement or Proxy Statement, or in
any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and will reimburse each such person
for any legal or other expenses reasonably incurred, promptly as they are
incurred, by such person in connection with investigating or defending any such
action or claim; provided, however, that DGC shall not be liable in any case to
the extent that any such loss, claim, damage or liability (or action in respect
thereof) arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement or
Proxy Statement or any such
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amendment or supplement in reliance upon or in conformity with information
furnished to DGC by or on behalf of the NBC Consolidated Group for use therein.
(e) Promptly after receipt by an indemnified party under subparagraph
(d) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against DGC under such
subparagraph, notify DGC in writing of the commencement thereof. In case any
such action shall be brought against any indemnified party and it shall notify
DGC of the commencement thereof, DGC shall be entitled to participate therein
and, to the extent that it shall wish, to assume the defense thereof, with
counsel satisfactory to such indemnified party, and, after notice from DGC to
such indemnified party of its election so to assume the defense thereof, DGC
shall not be liable to such indemnified party under such subparagraph for any
legal expenses of other counsel or any other expenses subsequently incurred by
such indemnified party; provided, however, if DGC elects not to assume such
defense or counsel for the indemnified parties advises in writing that there
are material substantive issues which raise conflicts of interest between DGC
or NBC and one or more of the indemnified parties, such indemnified parties may
retain counsel satisfactory to them, and DGC shall pay all reasonable fees and
expenses of such counsel for the indemnified parties promptly as statements
therefor are received.
5.07 Approval of Shareholders. NBC will (i) take all steps necessary
to call, give notice of, convene and hold a special meeting of its shareholders
as soon as practicable for the purpose of approving this Agreement and the
transactions contemplated hereby and for such other purposes as may be
necessary or desirable, (ii) recommend to its shareholders the approval of this
Agreement and the transactions contemplated hereby and such other matters as
may be submitted to its shareholders in connection with this Agreement, subject
to any action taken by, or upon the authority of, such Board of Directors in
the exercise of its good faith judgment as to its fiduciary duties to its
shareholders based on the advice of legal counsel, and (iii) cooperate and
consult with DGC and DGNB Louisiana with respect to each of the foregoing
matters. NBC, as the sole shareholder of Bank, shall approve this Agreement and
the Bank Merger.
5.08 Compliance with SEC Rules 144 and 145. NBC shall identify in a
letter to DGC, after consultation with its counsel and with DGC and its
counsel, persons who may be deemed to be affiliates of NBC as that term is
defined in Rule 145 under the Securities Act and who will become beneficial
owners of Common Stock of DGC pursuant to the Holding Company Merger ("NBC
Affiliates"). NBC shall use its best efforts to cause all NBC Affiliates to
execute and deliver to DGC written agreements to comply with the applicable
resale restrictions set forth in Rules 144 and 145 under the Securities Act.
5.09 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Date any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary or
desirable action.
5.10 Public Announcements. DGC, DGNB Louisiana, Bank and NBC will
cooperate with each other in the development and distribution of all news
releases and other public information disclosures with respect to this
Agreement or any of the transactions contemplated hereby. No party to this
agreement shall make any public announcement or otherwise make any disclosure
(either public or private), other than such disclosure to employees or agents
of any such party as may be required to carry out the transactions contemplated
by this Agreement and except as may be required by law, without the express
written consent of all parties hereto. Each party hereto shall undertake such
reasonable steps as may be required to ensure that its employees and agents
comply with the provisions of this Section 5.10.
5.11 Benefits. From and after the Effective Date, DGC will, subject to
compliance with applicable legal and regulatory requirements, provide coverage
for all Bank employees under all DGC employee benefit plans for which they are
eligible, as soon as practicable after the Effective Date. All prior years of
service of Bank employees
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will be counted for vesting and eligibility purposes under all applicable DGC
employee benefit plans to the extent permitted by applicable law. Any Bank
employee who, immediately prior to the Effective Date, is covered by or is a
participant in a Bank employee benefit plan listed in Schedule 3.19 of this
Agreement, shall, on the Effective Date, be covered by or participate in the
comparable DGC employee benefit plan if a comparable plan otherwise is
maintained by DGC and if the eligibility requirements of the DGC plan are met.
5.12 Indemnification. (a) From and after the Effective Date, DGC shall
indemnify, defend, and hold harmless the former directors, officers, employees
and agents of NBC (each such director, officer, employee or agent referred to
as a "Holding Company Indemnified Party") against all losses, claims, damages,
liabilities, judgments (and related expenses including but not limited to,
attorney's fees and amounts paid in settlement), joint, several or solidary,
and any action or other proceeding in respect thereof, to which the Holding
Company Indemnified Parties or any of them become subject, based upon or
arising out of actions or omissions of such persons occurring at or prior to
the Effective Date (including the transactions contemplated by this Agreement)
to the full extent permitted under Louisiana Law or by NBC's Articles of
Incorporation and Bylaws as in effect on the date hereof, whichever is greater.
(b) From and after the Effective Date, DGNB Louisiana shall indemnify,
defend, and hold harmless the former directors, officers, employees and agents
of Bank (each such director, officer, employee or agent referred to as a "Bank
Indemnified Party") against all losses, claims, damages liabilities, judgments
(and related expenses including but not limited to, attorney's fees and amounts
paid in settlement), joint, several or solidary, and any action or other
proceeding in respect thereof, to which Bank Indemnified Parties or any of them
become subject, based upon or arising out of actions or omissions of such
persons occurring at or prior to the Effective Date (including the transactions
contemplated by this Agreement) to the full extent permitted under Louisiana
Law or by Bank's Articles of Incorporation and Bylaws as in effect on the date
hereof, whichever is greater.
(c) DGNB Louisiana and DGC shall use its best efforts to maintain the
existing directors' and officers' liability insurance policy of Bank and NBC,
respectively, covering persons who are currently covered by such insurance for
a period of five (5) years after the Effective Date on terms generally no less
favorable than those in effect on the date of this Agreement; provided,
however, that DGNB Louisiana and DGC may substitute therefor policies providing
at least comparable coverage containing terms and conditions no less favorable
than those in effect on the date of this Agreement.
(d) The rights granted to the Holding Company Indemnified Parties and
Bank Indemnified Parties hereby shall be contractual rights inuring to the
benefit of all such parties and shall survive this Agreement and the Mergers,
and any merger, consolidation or reorganization of DGC.
5.13 Post-Merger Financial Information. During the six-month period
following the Effective Date, DGC shall file all Forms 10-Q and 10-K required
to be filed by it with the SEC timely.
5.14 Listing Application. DGC shall promptly prepare and submit to the
New York Stock Exchange a listing application covering the shares of DGC Common
Stock issuable in the Holding Company Merger, and shall use its best efforts to
obtain, prior to the Effective Date, approval for the listing of such DGC
Common Stock for trading on the New York Stock Exchange upon official notice of
issuance.
Article VI.
CLOSING CONDITIONS
6.01 Conditions to Each Party's Obligations under this Agreement. The
respective obligations of each party under this Agreement shall be subject to
the fulfillment at or prior to the Effective Date of the following conditions,
none of which may be waived:
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(a) This Agreement and the transactions contemplated hereby shall have
been approved by two-thirds of the voting power present at the special meeting
of shareholders of NBC called pursuant to Section 5.07 hereof.
(b) None of the parties hereto shall be subject to any order, decree
or injunction of a court or agency of competent jurisdiction which enjoins or
prohibits the consummation of the Mergers.
(c) DGC, DGNB Louisiana, NBC and Bank shall have received an opinion
of Messrs. Watkins Ludlam & Stennis, P.A. substantially to the effect that the
transactions contemplated by this Agreement will be treated for federal income
tax purposes as a tax-free reorganization under Section 368 of the Code.
(d) A Registration Statement relating to the shares of DGC Common
Stock to be issued pursuant to this Agreement shall have become effective under
the Securities Act and shall not be subject to any stop order or a threatened
stop order. All necessary consents or permits from or registrations or filings
with state securities commissions shall have been obtained or made.
(e) This Agreement and the transactions contemplated hereby shall have
been approved by the OCC and all other applicable federal and state
authorities.
6.02 Conditions to the Obligations of DGC and DGNB Louisiana under
this Agreement. The obligations of DGC and DGNB Louisiana under this Agreement
shall be further subject to the satisfaction, at or prior to the Effective
Date, of the following conditions, any one or more of which may be waived by
DGC and DGNB Louisiana:
(a) Each of the obligations of Bank and NBC required to be performed
by it at or prior to the Closing pursuant to the terms of this Agreement shall
have been duly performed and complied with and the representations and
warranties of Bank and NBC contained in this Agreement shall be true and
correct in all material respects as of the date of this Agreement and as of the
Effective Date as though made at and as of the Effective Date (except as
otherwise contemplated by this Agreement) and DGC and DGNB Louisiana shall have
received a certificate to that effect signed by the president of Bank and NBC.
(b) All action required to be taken by, or on the part of, Bank and
NBC to authorize the execution, delivery and performance of this Agreement by
Bank and NBC and the consummation of the transactions contemplated hereby shall
have been duly and validly taken by the Boards of Directors of Bank and NBC and
DGC and DGNB Louisiana shall have received certified copies of the resolutions
evidencing such authorization.
(c) Any and all permits, consents, waivers, clearances, approvals and
authorizations (in addition to those referred to in Section 6.01 hereof) of all
third parties and governmental bodies shall have been obtained by Bank and NBC,
which are necessary in connection with the consummation of the Mergers by NBC
and Bank and the other transactions contemplated hereby.
(d) DGC and DGNB Louisiana shall have received an opinion from
Kantrow, Spaht, Weaver & Blitzer (A Professional Law Corporation), counsel to
Bank and NBC, dated the date of the Closing, in form satisfactory to DGNB
Louisiana and DGC to the effect that:
i) NBC is a corporation duly organized, validly existing and in
good standing under the laws of the State of Louisiana and has all
requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. Bank is a state
banking corporation duly organized, validly existing and in good
standing under the laws of Louisiana (a) has all requisite corporate
power to own, lease and operate its properties and to carry on its
business as now being conducted, (b) is duly
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authorized to conduct a general banking business under the Banking
Laws of the State of Louisiana, and (c) is an insured bank as defined
in the Federal Deposit Insurance Act;
ii) This Agreement has been duly and validly authorized, executed
and delivered by NBC and Bank and is valid and enforceable against
each of them, except that enforcement may be limited by bankruptcy,
reorganization, insolvency and other similar laws and court decisions
relating to or affecting the enforcement of creditors' rights
generally and by general equitable principles;
iii) The authorized capital stock of NBC consists of 10,000,000
shares of NBC Common Stock, of which, as of December 31, 1996, 469,660
shares have been duly issued, are presently outstanding and are fully
paid and non-assessable and 1,000,000 shares of Preferred Stock of
which, as of December 31, 1996, no shares are outstanding;
iv) The authorized capital stock of Bank consists of 125,000
shares of Bank Common Stock of which, as of December 31, 1996, 100,000
shares are issued and outstanding; all of such outstanding shares are
validly issued, fully paid and non-assessable;
v) The execution and delivery by NBC and Bank of this Agreement,
consummation by NBC and Bank of the transactions contemplated hereby
and compliance by NBC and Bank with the provisions hereof will not
violate the Articles of Incorporation of NBC or Bank or violate,
result in a breach of, or constitute a default under, any material
lease, mortgage, contract, agreement, instrument, judgment, order or
decree to which NBC or Bank is a party or to which they may be
subject; and
vi) Such counsel has participated in several conferences with
representatives of the parties of this Agreement and their respective
accountants and counsel in connection with the preparation of the
Registration Statement and the Proxy Statement to be filed in
connection with the transactions contemplated by this Agreement and
have considered the matters required to be stated therein and the
statements contained therein, and based on the foregoing (in certain
circumstances relying as to materiality on the opinions of officers
and representatives of the parties to this Agreement) nothing has come
to the attention of such counsel that would lead them to believe that
such Registration Statement or the Proxy Statement, as amended or
supplemented if it has been amended or supplemented, at the time it
became effective and as amended or supplemented, (in the case of the
Registration Statement) or at the time distributed to shareholders (in
the case of the Proxy Statement), contained any untrue statement of a
material fact or omitted a material fact required to be stated therein
or necessary to make the statements therein not misleading (except in
each such case for the financial statements and other financial and
statistical data included therein, as to which no opinion need be
rendered).
As to matters of fact, counsel to NBC and Bank may rely, to the extent
they deem appropriate, upon certificates of officers of NBC and Bank, provided,
such certificates are delivered to DGC and DGNB Louisiana prior to the Closing
or attached to the opinion of counsel.
(e) There shall not have occurred any material adverse change in the
financial condition, results of operations, business or prospects of NBC or
Bank from the date of the NBC Latest Balance Sheet to the Closing.
(f) NBC shall have used it bests efforts to cause all Affiliates to
execute and deliver to DGC written agreements to comply with the applicable
resale restrictions set forth in Rule 145 under the Securities Act.
(g) Prior to the Effective Date, all outstanding options to acquire
shares of NBC Common Stock listed on Schedule 6.02(g) shall have been exercised
or terminated.
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Bank and NBC will furnish DGC and DGNB Louisiana with such
certificates of their officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 6.02 as DGC and DGNB
Louisiana may reasonably request.
6.03 Conditions to the Obligations of Bank of Commerce and NBC
Financial Corporation under this Agreement. The obligations of Bank and NBC
under this Agreement shall be further subject to the satisfaction, at or prior
to the Effective Date, of the following conditions, any one or more of which
may be waived by Bank and NBC:
(a) Each of the obligations of DGC or DGNB Louisiana, respectively,
required to be performed by them at or prior to the Closing pursuant to the
terms of this Agreement shall have been duly performed and complied in all
material respects with and the representations and warranties of DGC and DGNB
Louisiana contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Date as
though made at and as of the Effective Date (except as otherwise contemplated
by this Agreement) and Bank and NBC shall have received certificates to that
effect signed by the presidents of DGC and DGNB Louisiana, respectively.
(b) All action required to be taken by, or on the part of, DGC and
DGNB Louisiana to authorize the execution, delivery and performance of this
Agreement of DGC and DGNB Louisiana and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the Boards of
Directors of DGC and DGNB Louisiana, respectively, and Bank and NBC shall have
received certified copies of the resolutions evidencing such authorization.
(c) There shall not have occurred any material adverse change in the
financial condition, results of operations, business or prospects of DGC or
DGNB Louisiana from December 31, 1996 to the Closing.
(d) NBC and Bank shall have received from Messrs. Watkins, Ludlam and
Stennis, P.A., counsel for DGC and DGNB Louisiana (or as to certain matters
involving Louisiana law from Louisiana counsel to DGC, DG Louisiana and DGNB
Louisiana), an opinion, dated as of the Closing, in form and substance
satisfactory to NBC and Bank, to the effect that:
i) DGC is a corporation duly organized, validly existing and
in good standing under the laws of the State of Mississippi and has
all requisite power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. DGC is
qualified to do business as a foreign corporation in Louisiana. DGNB
Louisiana is a national bank duly organized, validly existing and in
good standing under the laws of the United States (a) has all
requisite corporate power to own, lease and operate its properties and
to carry on its business as now being conducted, (b) is duly
authorized to conduct a general banking business under the Banking
Laws of the United States, and (c) is an insured bank as defined in
the Federal Deposit Insurance Act;
ii) This Agreement has been duly and validly authorized,
executed and delivered by DGC and DGNB Louisiana is valid and
enforceable, except that enforcement may be limited by bankruptcy,
reorganization, insolvency and other similar laws and court decisions
relating to or affecting the enforcement of creditors' rights
generally and by general equitable principles;
iii) The authorized capital stock of DGC consists of
100,000,000 shares of DGC Common Stock, 25,000,000 shares of Class A
Voting Preferred Stock, no par value, and 25,000,000 shares of Class B
Non-Voting Preferred Stock, no par value of which, as of December 31,
1996, 39,185,394 shares of Common Stock have been duly issued, are
presently outstanding and are fully paid and non-assessable. All
shares of DGC Common Stock to be issued to holders of NBC Common Stock
will be, when issued as described in this Agreement and the
Registration Statement, duly authorized and validly issued, fully paid
and non-assessable, free of liens, security interests, pledges or
other encumbrances and all preemptive or
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similar rights other than liens, security interests, pledges or other
encumbrances placed thereon by the holders of NBC Common Stock;
iv) The authorized capital stock of DGNB Louisiana consists
of 234,121 shares of DGNB Louisiana Common Stock of which, as of
December 31, 1996, 234,121 shares are issued and outstanding; all of
such outstanding shares are validly issued, fully paid and
non-assessable;
v) The execution and delivery by DGC and DGNB Louisiana of
this Agreement, consummation by DGC and DGNB Louisiana of the
transactions contemplated hereby and compliance by DGC and DGNB
Louisiana with the provisions hereof will not violate the Articles of
Incorporation or Association of DGC and DGNB Louisiana or violate,
result in a breach of, or constitute a default under, any material
lease, mortgage, contract, agreement, instrument, judgment, order or
decree to which DGC and DGNB Louisiana is a party or to which they may
be subject;
vi) the Registration Statement has become effective, and to
such counsel's knowledge, no stop order suspending its effectiveness
has been issued nor have any proceedings for that purpose been
instituted;
vii) the Registration Statement and each amendment or
supplement thereto, as of their respective effective or issue dates,
complied as to form in all material respects with the requirements of
the Securities Act and the rules and regulations promulgated
thereunder, and we do not know of any contracts or documents required
to be filed as exhibits to the Registration Statement which are not
filed as required; it being understood that such counsel need express
no opinion as to the financial statements or other financial or
statistical data contained in or omitted from the Registration
Statement or the Proxy Statement; and
viii) Such counsel has participated in several conferences
with representatives of the parties of this Agreement and their
respective accountants and counsel in connection with the preparation
of the Registration Statement and the Proxy Statement to be filed in
connection with the transactions contemplated by this Agreement and
have considered the matters required to be stated therein and the
statements contained therein, and based on the foregoing (in certain
circumstances relying as to materiality on the opinions of officers
and representatives of the parties to this Agreement) nothing has come
to the attention of such counsel that would lead them to believe that
such Registration Statement or the Proxy Statement, as amended or
supplemented if it has been amended or supplemented, at the time it
became effective and as amended or supplemented, (in the case of the
Registration Statement) or at the time distributed to shareholders (in
the case of the Proxy Statement), contained any untrue statement of a
material fact or omitted a material fact required to be stated therein
or necessary to make the statements therein not misleading (except in
each such case for the financial statements and other financial and
statistical data included therein, as to which no opinion need be
rendered).
As to matters of fact, counsel to DGC and DGNB Louisiana may rely, to
the extent they deem appropriate, upon certificates of officers of DGC and DGNB
Louisiana, provided, such certificates are delivered to NBC and Bank prior to
the Closing or attached to the opinion of counsel.
(e) NBC shall have received a letter from National Capital
Corporation, or another financial advisor selected by NBC dated within five (5)
days of the date of mailing of the Proxy Statement to its shareholders to the
effect that the terms of the Holding Company Merger are fair to its
shareholders from a financial point of view.
DGC and DGNB Louisiana will furnish Bank and NBC with such
certificates of their officers or others and such other documents to evidence
fulfillment of the conditions set forth in this Section 6.03 as Bank and NBC
may reasonably request.
23
<PAGE> 98
Article VII.
CLOSING
7.01 Time and Place. Subject to the provisions of Articles VI and VIII
hereof, the Closing of the transactions contemplated hereby shall take place at
the offices of DGC, One Deposit Guaranty Plaza, 210 East Capitol Street,
Jackson, Mississippi 39205 at 9:00 A.M., local time, on the last business day
of the month after all of the conditions contained in Section 6.01(a) and
Section 6.01(e) are satisfied or at such other place, at such other time, or on
such other date as DGC, DGNB Louisiana, NBC and Bank may mutually agree upon
for the Closing to take place.
7.02 Deliveries at the Closing. Subject to the provisions of Articles
VI and VIII hereof, at the Closing there shall be delivered to DGC, DGNB
Louisiana, NBC and Bank the opinions, certificates, and other documents and
instruments required to be delivered under Article VI hereof.
Article VIII.
TERMINATION
8.01 Termination. This Agreement may be terminated at any time prior
to the Effective Date, whether before or after approval of the Holding Company
Merger by the shareholders of NBC:
(a) by mutual written consent of the parties, properly authorized by
their respective Boards of Directors;
(b) by DGC and DGNB Louisiana, if at the time of such termination
there shall have been any material adverse change in the financial condition,
results of operations, business or prospects of NBC or Bank from the date of
the NBC Latest Balance Sheet;
(c) by NBC and Bank, if at the time of such termination there shall
have been any material adverse change in the financial condition, results of
operations, business or prospects of DGC from December 31, 1996;
(d) by any party hereto, if a United States District Court shall rule
upon application of the Department of Justice after a full trial on the merits
or a decision on the merits based on a stipulation of facts that the
transactions contemplated by this Agreement violate the antitrust laws of the
United States;
(e) by any party hereto, if at the special meeting of shareholders to
be called by NBC pursuant to this Agreement, this Agreement shall not have been
approved by the affirmative vote of the holders of at least a majority of the
outstanding shares of NBC Common Stock voted at the special meeting of
shareholders of NBC called pursuant to Section 5.07 hereof;
(f) by DGC and DGNB Louisiana, in the event dissenters' rights are
exercised with respect to more than ten percent (10%) of the shares of NBC
Common Stock;
(g) by any party hereto if Closing shall not have occurred by December
31, 1997.
8.02 Effect of Termination. In the event of termination of this
Agreement by either DGC, DGNB Louisiana, NBC or Bank as provided above, this
Agreement shall forthwith become void and except as provided in Section 5.02,
Section 5.04 and Section 9.01 hereof there shall be no further liability on the
part of Bank, NBC, DGC, DGNB Louisiana, or their respective officers or
directors.
24
<PAGE> 99
Article IX.
MISCELLANEOUS
9.01 Expenses. Except as set forth below, all out-of-pocket costs and
expenses incurred in connection with the Mergers (including, but not limited
to, counsel fees) shall be paid by the party incurring such costs and expenses.
9.02 Notices. All notices or other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
prepaid registered or certified first class mail (return receipt requested) or
by facsimile, cable, telegram or telex addressed as follows:
(a) If to DGC or DGNB Louisiana, to:
Deposit Guaranty Corp.
One Deposit Guaranty Plaza
210 East Capitol Street
P.0. Box 730
Jackson, Mississippi 39205
Attention: Thomas M. Hontzas
Fax Number: (601) 354-8288
Copy to:
Watkins Ludlam & Stennis, P.A.
633 North State Street (39202)
Post Office Box 427
Jackson, Mississippi 39205-0427
Attention: L. Keith Parsons, Esq.
Fax Number: (601) 949-4804
(b) If to Bank or NBC, to:
NBC Financial Corporation
7777 Jefferson Highway
Baton Rouge, LA 70809
Attn: Thomas A. Boone
Fax Number: (504) 926-7582
Copy to:
Kantrow, Spaht, Weaver & Blitzer (APLC)
445 North Blvd. (70802)
P. O. Box 2997
Baton Rouge, LA 70821
Attn: Bob D. Tucker, Esq.
Fax Number: (504) 343-0637
or such other address as shall be furnished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
so mailed.
25
<PAGE> 100
9.03 Parties in Interest. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, and their respective
successors and assigns; provided, however, that neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other parties, and that
nothing in this Agreement is intended to confer, expressly or by implication,
upon any other person any rights or remedies under or by reason of this
Agreement.
9.04 Amendment, Extension and Waiver. Subject to applicable law, at
any time prior to the consummation of the Mergers, whether before or after
approval thereof by the NBC shareholders, DGC, DGNB Louisiana, NBC and Bank
may, by action taken by their respective Boards of Directors (i) amend this
Agreement, (ii) extend the time for the performance of any of the obligations
or other acts of the other parties hereto, (iii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, or (iv) waive compliance with any of the agreements or
conditions contained in Articles V and VI (other than the conditions set forth
in Section 6.01 hereof); provided, however, that, except as explicitly set
forth in Section 1.01 hereof, after any approval of the Holding Company Merger
by the shareholders of NBC, there may not be, without further approval of such
shareholders, any amendment, extension or waiver of this Agreement which
changes the amount or form of consideration to be delivered to shareholders of
NBC. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto. Any agreement on the part of a
party hereto to any extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party, but such waiver or
failure to insist on strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
9.05 Complete Agreement. This Agreement, including the documents and
other writings referred to herein or delivered pursuant hereto and the
Confidentiality Agreement dated December 4, 1996, contains the entire agreement
and understanding of the parties with respect to its subject matter. There are
no restrictions, agreements, promises, warranties, covenants or undertakings
other than those expressly set forth herein or therein. This Agreement
supersedes all prior agreements and understandings between the parties, both
written and oral, with respect to its subject matter.
9.06 Non-Survival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Date, or the earlier termination of this Agreement pursuant to Article VIII
hereof. Each party hereby agrees that its sole right and remedy with respect to
any breach of a representation or a warranty by the other party shall be to not
consummate the transactions described herein if such breach results in the
nonsatisfaction of a condition set forth in Section 6.02(a) or 6.03(a) hereof,
provided, however, that the foregoing shall not be deemed a waiver of any claim
for intentional misrepresentation or fraud.
9.07 Counterparts. This Agreement may be executed in one or more
counterparts all of which shall be considered one and the same agreement and
each of which shall be deemed an original.
9.08 Governing Law. This Agreement shall be governed by the laws of
the State of Louisiana, without giving effect to the principles of conflicts of
laws thereof.
9.09 Headings. The Article and Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
26
<PAGE> 101
IN WITNESS WHEREOF, a majority of the members of the Boards of
Directors of DGNB Louisiana and Bank of Commerce, respectively, have each
executed this Agreement and directed the authorized signature and seal of each
respective bank to be set hereunto by its President and attested to by its
Secretary or Cashier, and the Boards of Directors of DGC and NBC have caused
this Agreement to be executed by their duly authorized officers, all as of the
day and year first above written.
[Signatures]
<PAGE> 102
EXHIBIT B
FAIRNESS OPINION OF NATIONAL CAPITAL CORPORATION
<PAGE> 103
April 28, 1997
The Board of Directors
NBC Financial Corporation
7777 Jefferson Highway
Baton Rouge, Louisiana 70809
Attention: Mr. Thomas A. Boone, President and Chief Executive Officer
Gentlemen:
We understand that NBC Financial Corporation ("NBC") and Deposit Guaranty
Corporation ("Deposit Guaranty") have entered into an Agreement and Plan of
Merger, dated as of February 20, 1997, (the "Agreement"). Pursuant to the
Agreement, NBC will be merged with and into a wholly owned subsidiary of
Deposit Guaranty with the wholly owned subsidiary as the surviving entity
resulting from the merger (the "Merger"). Upon consummation of the Merger, each
share of common stock of NBC will be converted into 0.75808 shares of Deposit
Guaranty Corporation common stock. You have provided us with the proxy
statement/prospectus, which includes the Agreement, in substantially the form
to be sent to the stockholders of Deposit Guaranty and NBC (the "Proxy
Statement").
National Capital Corporation ("NCC") has extensive experience in investment
analysis and the valuation of bank and bank holding company securities in
connection with acquisitions and mergers. Neither NCC, nor any of its officers,
directors, or employees has an interest in the common stock of NBC. NCC has
performed valuation services for NBC prior to the present engagement, and an
affiliate of NCC, American Planning Corporation ("APC"), has provided strategic
planning advisory services to NBC and its subsidiary bank. The revenues derived
from such services are insignificant when compared to the total gross revenues
of NCC and/or APC. NCC is currently acting as financial advisor to the Board of
Directors of NBC in connection with the Merger and will receive a fee for such
services, payment of a portion of which is contingent upon consummation of the
Merger.
You have asked us to render our opinion as to whether the Exchange Ratio is
fair, from a financial point of view, to the stockholders of NBC.
In the course of our analysis for rendering this opinion, we have:
reviewed the Proxy Statement;
reviewed Deposit Guaranty's Annual Report to Stockholders, Annual
Report on Form 10-K for the fiscal year ended December 31, 1996,
and the materials incorporated by reference in the Proxy
Statement;
reviewed NBC's Audited Financial Report for the fiscal years ended
December 31, 1995, and December 31, 1996;
reviewed certain operating and financial information provided to us by
Deposit Guaranty's management related to its business and
prospects and reviewed certain operating and financial
information, including projections, provided to us by NBC's
management relating to its business and prospects;
met with certain members of NBC's senior management to discuss their
operations, historical financial statements, and future
prospects;
<PAGE> 104
reviewed the historical prices and trading volumes of the shares of
Deposit Guaranty Common Stock and NBC Common Stock;
reviewed publicly available financial data and stock market
performance data of companies which we deemed generally
comparable to Deposit Guaranty and NBC;
reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to the Merger; and
conducted such other studies, analyses, inquiries, and investigations
as we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy and
completeness of the financial and other information provided to us by Deposit
Guaranty and NBC. With respect to NBC's projected financial results, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of NBC as to the
expected future performance of NBC. We have not assumed any responsibility for
the information or projections provided to us and we have further relied upon
the assurances of the management of NBC that they are unaware of any facts that
would make the information or projections provided to us incomplete or
misleading. In arriving at our opinion, we have not performed or obtained any
independent appraisal of the assets of Deposit Guaranty and NBC. Our opinion is
necessarily based on economic, market, and other conditions, and the
information made available to us, as of the date hereof.
Based on the foregoing, it is our opinion that the Exchange Ratio is fair, from
a financial point of view, to the stockholders of NBC.
Yours very truly,
NATIONAL CAPITAL CORPORATION
By: /s/ J. Ken Walters
------------------------------
J. Ken Walters
President
<PAGE> 105
EXHIBIT C
SECTION 131 OF THE LOUISIANA BUSINESS
CORPORATION LAW
La. R.S. 12:131 (1993)
Section 131. Rights of a shareholder dissenting from certain corporate actions
A. Except as provided in subsection B of this section, if a
corporation has, by vote of its shareholders, authorized a sale, lease or
exchange of all of its assets, or has, by vote of its shareholders, become a
party to a merger or consolidation, then, unless such authorization or action
shall have been given or approved by at least eighty percent of the total
voting power, a shareholder who voted against such corporate action shall have
the right to dissent. If a corporation has become a party to a merger pursuant
to R.S. 12:112(H), the shareholders of any subsidiaries party to the merger
shall have the right to dissent without regard to the proportion of the voting
power which approved the merger and despite the fact that the merger was not
approved by vote of the shareholders of any of the corporations involved.
B. The right to dissent provided by this Section shall not exist in
the case of:
(1) A sale pursuant to an order of a court having jurisdiction in the
premises.
(2) A sale for cash on terms requiring distribution of all or
substantially all of the net proceeds to the shareholders in accordance with
their respective interests within one year after the date of the sale.
(3) Shareholders holding shares of any class of stock which, at the
record date fixed to determine shareholders entitled to receive notice of and
to vote at the meeting of shareholders at which a merger or consolidation was
acted on, were listed on a national securities exchange, or were designated as
a national market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, unless the articles of the
corporation issuing such stock provide otherwise or the shares of such
shareholders were not converted by the merger or consolidation solely into
shares of the surviving or new corporation.
C. Except as provided in the last sentence of this subsection, any
shareholder electing to exercise such right of dissent shall file with the
corporation, prior to or at the meeting of shareholders at which such proposed
corporate action is submitted to a vote, a written objection to such proposed
corporate action, and shall vote his shares against such action. If such
proposed corporate action be taken by the required vote, but by less than
eighty percent of the total voting power, and the merger, consolidation or
sale, lease or exchange of assets authorized thereby be effected, the
corporation shall promptly thereafter give written notice thereof, by
registered mail, to each shareholder who filed such written objection to, and
voted his shares against, such action, at such shareholder's last address on
the corporation's records. Each such shareholder may, within twenty days after
the mailing of such notice to him, but not thereafter, file with the
corporation a demand in writing for the fair cash value of his shares as of the
day before such vote was taken; provided that he state in such demand the value
demanded, and a post office address to which the reply of the corporation may
be sent, and at the same time deposit in escrow in a chartered bank or trust
company located in the parish of the registered office of the corporation, the
certificates representing his shares, duly endorsed and transferred to the
corporation upon the sole condition that said certificates shall be delivered
to the corporation upon payment of the value of the shares determined in
accordance with the provisions of this section. With his demand the shareholder
shall deliver to the corporation, the written acknowledgment of such bank or
trust company that it so holds his certificates of stock. Unless the objection,
demand and acknowledgment aforesaid be made and delivered by the shareholder
within the period above limited, he shall conclusively be presumed to have
acquiesced in the corporate action proposed or taken. In the case of a merger
pursuant to R.S. 12:112(H), the dissenting shareholder need not file an
objection with the corporation nor vote against the merger, but need only file
with the corporation, within twenty days after a copy of the merger certificate
was mailed to him, a demand in writing for the cash value of his shares as of
the day before the certificate was filed with the secretary of state, state in
such demand the value demanded and a post office address to which the
corporation's reply may be sent, deposit the certificates representing his
shares in escrow as hereinabove provided, and deliver to the corporation with
his demand the acknowledgment of the escrow bank or trust company as
hereinabove prescribed.
<PAGE> 106
D. If the corporation does not agree to the value so stated and
demanded, or does not agree that a payment is due, it shall, within twenty days
after receipt of such demand and acknowledgment, notify in writing the
shareholder, at the designated post office address, of its disagreement, and
shall state in such notice the value it will agree to pay if any payment should
be held to be due; otherwise it shall be liable for, and shall pay to the
dissatisfied shareholder, the value demanded by him for his shares.
E. In case of disagreement as to such fair cash value, or as to
whether any payment is due, after compliance by the parties with the provisions
of subsections C and D of this section, the dissatisfied shareholder, within
sixty days after receipt of notice in writing of the corporation's
disagreement, but not thereafter, may file suit against the corporation, or the
merged or consolidated corporation, as the case may be, in the district court
of the parish in which the corporation or the merged or consolidated
corporation, as the case may be, has its registered office, praying the court
to fix and decree the fair cash value of the dissatisfied shareholder's shares
as of the day before such corporate action complained of was taken, and the
court shall, on such evidence as may be adduced in relation thereto, determine
summarily whether any payment is due, and, if so, such cash value, and render
judgment accordingly. Any shareholder entitled to file such suit may, within
such sixty-day period but not thereafter, intervene as a plaintiff in such suit
filed by another shareholder, and recover therein judgment against the
corporation for the fair cash value of his shares. No order or decree shall be
made by the court staying the proposed corporate action, and any such corporate
action may be carried to completion notwithstanding any such suit. Failure of
the shareholder to bring suit, or to intervene in such a suit, within sixty
days after receipt of notice of disagreement by the corporation shall
conclusively bind the shareholder (1) by the corporation's statement that no
payment is due, or (2) if the corporation does not contend that no payment is
due, to accept the value of his shares as fixed by the corporation in its
notice of disagreement.
F. When the fair value of the shares has been agreed upon between the
shareholder and the corporation, or when the corporation has become liable for
the value demanded by the shareholder because of failure to give notice of
disagreement and of the value it will pay, or when the shareholder has become
bound to accept the value the corporation agrees is due because of his failure
to bring suit within sixty days after receipt of notice of the corporation's
disagreement, the action of the shareholder to recover such value must be
brought within five years from the date the value was agreed upon, or the
liability of the corporation became fixed.
G. If the corporation or the merged or consolidated corporation, as
the case may be, shall, in its notice of disagreement, have offered to pay to
the dissatisfied shareholder on demand an amount in cash deemed by it to be the
fair cash value of his shares, and if, on the institution of a suit by the
dissatisfied shareholder claiming an amount in excess of the amount so offered,
the corporation, or the merged or consolidated corporation, as the case may be,
shall deposit in the registry of the court, there to remain until the final
determination of the cause, the amount so offered, then, if the amount finally
awarded such shareholder, exclusive of interest and costs, be more than the
amount offered and deposited as aforesaid, the costs of the proceeding shall be
taxed against the corporation, or the merged or consolidated corporation, as
the case may be; otherwise the costs of the proceeding shall be taxed against
such shareholder.
H. Upon filing a demand for the value of his shares, the shareholder
shall cease to have any of the rights of a shareholder except the rights
accorded by this section. Such a demand may be withdrawn by the shareholder at
any time before the corporation gives notice of disagreement, as provided in
subsection D of this section. After such notice of disagreement is given,
withdrawal of a notice of election shall require the written consent of the
corporation. If a notice of election is withdrawn, or the proposed corporate
action is abandoned or rescinded, or a court shall determine that the
shareholder is not entitled to receive payment for his shares, or the
shareholder shall otherwise lose his dissenter's rights, he shall not have the
right to receive payment for his shares, his share certificates shall be
returned to him (and, on his request, new certificates shall be issued to him
in exchange for the old ones endorsed to the corporation), and he shall be
reinstated to all his rights as a shareholder as of the filing of his demand
for value, including any intervening preemptive rights, and the right to
payment of any intervening dividend or other distribution, or, if any such
rights have expired or any such dividend or distribution other than in cash has
been completed, in lieu thereof, at the election of the corporation, the fair
value thereof in cash as determined by the board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceedings that may have been taken in the interim.
<PAGE> 107
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Deposit Guaranty is incorporated under the laws of Mississippi.
Subarticle E of Article 8 of the Mississippi Business Corporation Act
prescribes the conditions under which indemnification may be obtained by a
present or former director or officer of Deposit Guaranty who incurs expenses
or liability as a consequence of matters arising out of his activities as a
director or officer.
Article Nine of Deposit Guaranty's Articles of Incorporation also
provides for indemnification of officers and directors under certain
circumstances. Deposit Guaranty has purchased a liability policy which, subject
to any limitations set forth in the policy, indemnifies Deposit Guaranty's
directors and officers for damages that they become legally obligated to pay as
a result of any negligent act, error or omission committed by such person in
his capacity as an officer or director.
ITEM 21. EXHIBITS
The following exhibits are furnished (or incorporated by reference) as
a part of this Registration Statement:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2* Agreement and Plan of Merger dated as of February 20, 1997, as amended,
included as Exhibit A to the Proxy Statement/Prospectus contained herein
5* Opinion of Watkins Ludlam & Stennis, P.A. regarding legality of common
stock registered hereby
8* Opinion of Watkins Ludlam & Stennis, P.A. regarding tax matters
23(a)* Consent of KPMG Peat Marwick LLP,
independent auditors, with respect to
consolidated financial statements of
Deposit Guaranty Corp.
23(b)* Consent of Hannis T. Bourgeois & Co., L.L.P., independent accountants, with
respect to consolidated financial statements of NBC Financial Corporation
23(c)* Consent of Watkins Ludlam & Stennis, P.A. is contained in their opinion filed
as Exhibit 5 to this Registration Statement
23(d)* Consent of National Capital Corporation
24* Power of attorney included as part of signature page
99* Form of Proxy
</TABLE>
* Previously filed.
ITEM 22. UNDERTAKINGS
(1) The Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such
<PAGE> 108
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(2) The Registrant hereby undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and issued in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) The Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(4) The Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(5) The Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 20 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
<PAGE> 109
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Deposit
Guaranty has duly caused this Amendment No. 1 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Jackson, State of Mississippi on this the 25th day of April, 1997.
DEPOSIT GUARANTY CORP.
BY: /s/ HOWARD L. MCMILLAN, JR.
----------------------------------
Howard L. McMillan, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
*
- ------------------------------ Chairman of the Board April 25, 1997
E. B. Robinson, Jr. and Director (Principal
Executive Officer)
/s/ HOWARD L. MCMILLAN, JR.
- ------------------------------ President and Director April 25, 1997
Howard L. McMillan, Jr.
*
- ------------------------------ Executive Vice President April 25, 1997
Arlen L. McDonald (Principal Financial
Officer)
</TABLE>
<PAGE> 110
<TABLE>
<S> <C> <C>
*
- -------------------------------- Controller (Principal April 25, 1997
Stephen E. Barker Accounting Officer)
*
- -------------------------------- Director April 25, 1997
Haley R. Barbour
*
- -------------------------------- Director April 25, 1997
Richard H. Bremer
*
- -------------------------------- Director April 25, 1997
Sharon S. Greener
*
- -------------------------------- Director April 25, 1997
Warren A. Hood, Jr.
*
- -------------------------------- Director April 25, 1997
Charles L. Irby
*
- -------------------------------- Director April 25, 1997
William R. James
*
- -------------------------------- Director April 25, 1997
Booker T. Jones
*
- -------------------------------- Director April 25, 1997
Richard D. McRae, Jr.
*
- -------------------------------- Director April 25, 1997
W. R. Newman, III
*
- -------------------------------- Director April 25, 1997
John N. Palmer
*
- -------------------------------- Director April 25, 1997
J. Kelley Williams
*BY: /s/ HOWARD L. MCMILLAN, JR.
-----------------------------
Howard L. McMillan, Jr.
Attorney-in-Fact
</TABLE>
<PAGE> 111
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description Page Number
- -------------- ----------- -----------
<S> <C> <C>
2* Agreement and Plan of Merger dated as of February 20, 1997, as
amended, included as Exhibit A to the Proxy Statement/Prospectus
contained herein
5* Opinion of Watkins Ludlam & Stennis, P.A. regarding legality of
common stock registered hereby
8* Opinion of Watkins Ludlam & Stennis, P.A. regarding tax matters
23(a)* Consent of KPMG Peat Marwick LLP, independent auditors,
with respect to consolidated financial statements of
Deposit Guaranty Corp.
23(b)* Consent of Hannis T. Bourgeois, & Co., L.L.P., independent accountants,
with respect to consolidated financial statements of NBC Financial
Corporation
23(c)* Consent of Watkins Ludlam & Stennis, P.A. is contained in their opinion
filed as Exhibit 5 to this Registration Statement
23(d)* Consent of National Capital Corporation
24* Power of attorney included as part of signature page
99* Form of Proxy
</TABLE>
* Previoiusly filed
